Are TRICARE Reserve Select Monthly Premiums Tax-Deductible?

Pre-Tax vs. After-Tax

The typical worker in an employer-provided health plan has her insurance premiums taken directly out of her paycheck. The employer deducts those premiums before determining how much money to withhold for income tax. The premiums are thus paid with "pre-tax" dollars -- and the worker can't claim a tax deduction for the premiums because that money was never counted as part of her taxable income. But when workers pay their health insurance premiums out of pocket, with money from their take-home pay, they are paying them with "after-tax" dollars. In that case, the premiums do count toward a deduction for medical expenses.

TRICARE Reserve Select

Premiums for TRICARE Reserve Select are not taken out of enrolled service members' military pay. Instead, the service members receive a monthly bill from the contractor that administers the plan on behalf of the military. They then pay the premium directly to the contractor out of pocket with after-tax dollars.

Medical Deduction Eligibility

To claim a deduction for medical expenses, including TRICARE Reserve Select premiums paid with after-tax dollars, taxpayers must meet two conditions. First, they must itemize their deductions on their tax return; if they claim the standard deduction, they cannot take a medical expenses deduction. Second, the total amount of their medical and dental expenses must exceed 7.5 percent of their adjusted gross income.

Claiming the Deduction

To see whether they can claim the medical expenses deduction, service members should fill out Schedule A, the Internal Revenue Service's form for reporting itemized deductions. On Line 1, they enter the total amount of all their medical and dental expenses, including after-tax TRICARE Reserve Select Premiums. On Line 2, they enter their federal adjusted gross income, which they determine by completing the first page of their Form 1040 tax return. They then multiply Line 2 by 0.075 and enter the result on Line 3. Finally, they subtract Line 3 from Line 1. Whatever is left over is their medical expenses deduction.

TRICARE Reserve Select Eligibility

To be eligible for TRICARE Reserve Select, service members must meet three criteria. First, they must be National Guard or reserve troops who were called to active duty for a Pentagon-defined "contingency" operation sometime after Sept. 11, 2001. Such operations included the wars in Afghanistan and Iraq as well as the "Noble Eagle" domestic antiterrorism operation. Second, they must have served on active duty for at least 90 days. Third, when their call-up ended, they must have agreed to serve in the Selected Reserve, a segment of the military reserves that is first in line for future call-ups. Eligible service members can get one year of TRICARE Reserve Select coverage for every 90 days of active duty in a contingency operation, up to four years of coverage.