Health and Life Insurance

How does health and life insurance affect my taxes?

Many know from experience that medical expenses can easily overwhelm even the best financial plans. Whether it’s a quick ER visit with only modest charges, or a serious or chronic condition, going to the doctor can wreck your bank account.

Luckily, there are a few tax breaks to cushion the blow:

• The medical expense deduction lets you recoup qualifying medical expenses. There’s a big caveat, though: you can only deduct the amount that exceeds 7.5% of your 2020 AGI.
• There are various ways to set aside pre-tax money to pay for expenses later. Among the variants are HSAs, FSAs, and MSAs. We cover what these accounts are, who’s eligible, how you use them, and what counts as qualifying expenses.
• When you leave a job or retire, it may make sense to take advantage of COBRA, to continue your current insurance plan during the transition.
• Finally, we look at a few tax breaks associated with life insurance and long-term care insurance (LTC). They each have functions in a complete financial plan, and there are ways to get a tax break from them.

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