Heath Care Tax Deduction
If your medical expenses exceed 7.5 percent of your adjusted gross income, you are allowed to take an itemized deduction for the amount by which your expenses exceed the threshold. For example, if your adjusted gross income is $55,000 and your medical bills were $6,125, you can take a deduction of $2,000 ($55,000 times 7.5 percent equals $4,125. $6,125 minus $4,125 equals $2,000). Qualifying medical expenses can be medical, dental or vision care for you, your spouse or any dependents. Allowable medical services include those to prevent future problems, treat current problems or to alleviate pain. Medical drugs are deductible if they require a prescription. You can also include any costs that you incur traveling to a hospital including tolls, parking fee and mileage. For 2012, mileage is deductible at the rate of 23 cents per mile.
Health Savings Account
Health savings accounts are tax-sheltered accounts to save for future medical expenses. In order to be eligible, you must have a high deductible health insurance plan. For 2012, a high deductible is $1,200 for an individual and $2,400 for a family. This amount is adjusted annually. Each year, you can contribute up to a set limit depending on whether your health savings account is for you or for you and your family. For 2012, the limit is $3,100 for an individual account and $6,250 for a family account. You can deduct these contributions as an above-the-line deduction.
Self-Employment Health Insurance
If you are self-employed, in a partnership or you own more than 2 percent of an S corporation, you can deduct the cost of your health insurance policy and the policy for your spouse or dependents. In order to qualify the deduction, the policy must be in the name of the self-employed individual, partnership or business. Qualified long-term care premiums may be included in this deduction; however, there are limits for the deductible amounts of these policies based upon the insured's age. This deduction only affects your income tax; it does not decrease your tax liability for self-employment taxes.