I am not a tax professional. I don’t even play one on TV. But the nature of my work requires that as an insurance broker, I am informed on some areas of tax law. Since “tax season” is well under way, I thought it might be helpful to share some tax bits.
Individuals should soon receive their IRS 1095 tax forms at their home address. If an employee does not receive their copy by the March 2, 2018, t… hey should contact the customer service number listed on the back of their insurance member ID card. If insurance is provided through a self-funded large group plan, contact the employer.
This form is used to verify that individuals have met the requirement to have “minimum value” insurance for the tax year 2017. Note the law requiring coverage is still in effect for 2018 as well as 2017 (as of this writing).
If insurance is issued through the Exchange, one can log-in to the Covered CA account to download the form.
If your high deductible health plan is HSA (Health Savings Account) qualified, you are eligible to make a contribution to an HSA until April 15th. This tax-favored savings account could be considered a “health IRA”- only better. Contributions to the plan are deductible for federal purposes and if withdrawn for qualified medical expenses, including Medicare Part B premiums, the funds are never taxed!
The contribution is an “above the line” deduction, so you are not required to itemize deductions to obtain the tax benefits. In some cases, this could be the transaction that brings an individual’s income down low enough to qualify for subsidy on the Exchange. It’s important not to overlook this opportunity. If you are unclear if the policy is HSA qualified, you may ask your insurer at the customer service number on your card or ask your plan’s insurance representative.
Limits for 2017 contributions are $3400 for an individual and $6750 for a family. Individuals age 55 and over may be eligible to contribute an additional $1000 as a “catch-up” contribution.
Note HSA funds may not be used to pay for expenses incurred before the account was established. Doing so could cause you to incur a 20% penalty on the funds withdrawn.
If you are over 65 and Medicare-Eligible watch for the IRMAA tax or penalty. This is an additional cost levied on high earners. Depending on income, this tax could raise your Medicare Part B premiums from $53-294 monthly in 2017. Your Medicare Part D Rx premiums could raise as much as $76.80 per month. The IRS uses a two year look back to calculate the income used to assess the penalty.
If you don’t believe your income will continue at this level you have the right to appeal this charge. Since most people experience an income drop following retirement, this may be an important step in reducing your costs. Following is the link to the form : https://www.ssa.gov/forms/ssa-44.pdf. Insurance Insights covered this in detail in Column 172, July 23,2017.
Self-employed folks may be eligible for another “above the line” deduction for health insurance premiums. This deduction is available to the self-employed who are not offered employer sponsored coverage. The deduction may not exceed the income earned from the business.
Tax time is never fun. While we want to pay our fair share, we don’t necessarily want to pay more tax than is required. So it’s important to pay attention to these opportunities. I have heard it said that “it’s possible to make more money by saving on taxes than making more money “, so it’s worthwhile to know the rules.
In my experience, a good tax professional is well worth the fees their fees since there is no way I can keep up with all the different rules!