Health · Chapter 15 · Tax-Advantaged Accounts
Taxation of Medical Expense Insurance
Definition
Benefits received are NOT taxable (they offset expenses). Employees itemizing may deduct premiums + unreimbursed costs exceeding 7.5% of AGI. Self-employed/sole proprietors deduct 100% of premiums (an above-the-line deduction; family included); partnerships/LLCs deduct premiums at the entity level.
Exam tip
Employee = 7.5%-of-AGI threshold. Self-employed = 100% deductible. Benefits = never taxed.
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