If you itemize your deductions, the Internal Revenue Service allows you to claim a certain percentage of the medical expenses you paid for yourself, your spouse or your dependents. The IRS generally accepts the premiums paid on health insurance as a medical expense. Although you might be able to deduct the cost of your children’s health insurance, you need to make sure that you meet all qualifications.
Type of Policy
The policy should provide coverage to treat or prevent medical conditions. Policies can include visits to your doctor, hospitalization, medically prescribed tests, surgery, dental care and prescription medications. Policies that cover strictly cosmetic procedures, over-the-counter medications or items such as health club dues normally do not meet the IRS guidelines for medical expenses. Life insurance or loss-of-limb policies do not qualify as a medical expense, nor do policies that pay you a flat amount per week or month to replace your income when you are hospitalized or ill.
Payment of Policy
The IRS regulations do not allow you to receive favored tax status twice for the same expense. This means that if you pay the insurance premiums with pre-tax dollars, such as through your employer’s cafeteria plan, you cannot claim a deduction for the same premiums. However, if only a portion of your premiums is paid pre-tax, you can claim the remainder of your premiums. If your employer pays your insurance premiums and includes them as taxable wages on your W-2, you may take the deduction, but if he does not include them, you cannot deduct them. This includes payments for which your employer reimburses you under a health reimbursement arrangement that your employer funds.
Child’s Status as Dependent
Typically, the IRS requires that a dependent child be a citizen of the U.S. and meet the criteria for your qualifying child. A qualifying child must be 18 years of age or younger, or 24 years of age or younger if a full-time student. Age restrictions do not apply if the child is permanently and completely disabled. The child must reside with you for more than six months of the year, not furnish more than 50 percent of his own support and, if the child is married, he cannot file a joint return with his spouse unless the sole reason for the return is to claim a refund. If you are divorced or separated, the custodial parent normally claims the child as a dependent unless the decree specifically states otherwise. However, the non-custodial parent may be able to claim the child if the custodial parent furnishes a statement stating that she will not take an exemption for the child for the year in question.
The IRS limits the amount you can deduct for medical expenses. The limit is based on your adjusted gross income, which appeared on line 38 of the 2011 Form 1040. Although subject to change, at the time of publication, you could deduct the amount of your medical expenses that were greater than 7.5 percent of your adjusted gross income. To illustrate, if your adjusted gross income was $30,000, you could deduct the portion of your medical expenses in excess of $2,250. If your expenses were $2,000, you could not take a deduction. If expenses totaled $3,000, you could take a deduction of $750.
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