Tax Deductible Life Insurance Premiums – Home › Latest articles › Taxes › How to maximize your insurance income tax deduction (before the end of 2023)
If there’s one part of filing income taxes that you can truly enjoy, it’s claiming tax deductions and refunds.
Tax Deductible Life Insurance Premiums
A tax refund is a fixed amount that you can deduct based on your total taxable income, or you can claim the tax deduction separately if it is included in the expenses allowed on your tax return.
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But for both types of claims, please remember to provide supporting documentation to support your claim for these refunds and reliefs approved by the Land Revenue Department of Malaysia (LHDN).
One of the best ways to claim an income tax deduction is to make sure you qualify for an insurance deduction. Since insurance is an expense that may cost you some of your income in any given year, why not make the most of it?
But it is not as simple as it seems, it is divided into different categories of insurance and bundled with Employees Provident Fund (EPF) tax relief.
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Here’s how it works and how to make sure you maximize your insurance tax deduction before the end of the year. Applying for coverage and getting approved can take some time, so it’s best to start early. Don’t wait until near the end of the year to apply!
Deferred Annuities and Private Retirement Schemes (PRS): effective from assessment year 2012 to assessment year 2025
You can apply for life insurance, education and health insurance, and deferred annuities. These are the types of policies that qualify and the amount of premium you can claim for tax relief.
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If the basic policy comes with critical illness insurance (i.e. critical illness): 100% of the additional premium
If critical illness cover (i.e. critical illness) is included in temporary life/personal accident cover: 60% of the premium
Further details and conditions can be found in the Revenue Department of Malaysia (LHDN) Public Resolution, Taxation of Resident Individuals Part I – Donations or Contributions and Allowable Deductions.
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When filing a waiver, it can be helpful to refer to your insurance annual statement. Your statement can break down the premiums you paid into each tax deduction category.
To file a tax deduction, you simply use the number provided on your annual return. Based on the example above, the only issue is that critical illness insurance can be claimed under medical or life benefits. You can claim up to 100% of your premium in the life insurance category or up to 60% of your premium in the medical benefits category:
In this example, it makes more sense to claim critical illness premium under the life insurance category. But if you exceed the claim limit for that category, then you can claim critical illness premium under the health insurance category. This is to maximize the claim available to you.
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Find the health insurance that best suits your needs and qualify for a tax deduction when you file your 2024 taxes.
But that’s not all you can claim: For a complete list of tax deductions and additional information on how to file your taxes, visit our Personal Income Tax Guide. It’s best to file your taxes by the deadline; otherwise, you may be subject to fines or penalties.
Follow our income tax guide here, which will update you with all the information you need to file your 2023 income tax. Health insurance is one of the largest monthly expenses for some Americans, leaving them wondering which medical expenses are tax-deductible to reduce your bill. . As health care prices rise, some consumers are looking to lower costs through tax breaks on monthly health insurance premiums.
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If you are enrolled in an employer-sponsored health insurance plan, your premiums may already be tax-deductible. If your premiums were paid through a payroll deduction program, they were likely paid with pre-tax dollars, so you won’t be able to claim a year-end tax deduction.
However, you can still claim the deduction if your total health care expenses for the year are high enough. Self-employed workers may be eligible for health insurance premium cancellations, but only if they meet certain criteria. This article will explore tax-deductible medical expenses, including eligibility requirements.
As the cost of health care rises in the United States, health insurance premiums (the amount paid up front to keep a policy in force) have steadily increased. Premiums can be considered the “maintenance fee” of a medical policy and do not include other costs that consumers must pay, such as deductibles, copays, and additional out-of-pocket costs.
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When President Barack Obama signed the Affordable Care Act into law in 2010, he allowed certain families to receive premium tax credits for their health insurance plans, relieving some of the burden of skyrocketing health insurance premiums.
About half of Americans get health insurance through employer-based plans, according to research from the Kaiser Family Foundation, a nonprofit organization focused on U.S. health care issues.
If your health insurance premiums are deducted through a payroll deduction program, you’ll likely pay part of your premiums with pre-tax dollars. So if you deduct the premium at the end of the year, you’re effectively deducting the expense twice.
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However, if you buy your own health insurance using after-tax dollars, you may be able to deduct part of the premium. For the 2022 and 2023 tax years, you can deduct any unreimbursed qualified health care expenses you paid for yourself, your spouse, or your dependents, but only if they exceed 7.5% of your adjusted gross income (AGI).
AGI is a modification of your gross income. Include all sources of your income (salary, dividends, spousal support, capital gains, interest income, royalties, rental income, and retirement distributions) minus any allowable deductions from your income, including retirement plan contributions, student Loan interest payments, losses resulting from the sale or exchange of assets, early withdrawal penalties imposed by financial institutions, etc.
Expenses that qualify for this deduction include health insurance premiums, as well as any out-of-pocket expenses such as doctor visits, surgeries, dental care, vision care and mental health care. However, you can only deduct expenses that exceed 7.5% of your AGI.
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For example, your adjusted gross income for the year is $50,000. Seven-and-a-half percent of that is $3,750, so any qualified expenses over that amount are deductible. If your medical expenses (including premiums) total $6,000, you can deduct $2,250 from your taxable income. Be sure not to include any reimbursement expenses, such as premium tax credits, in your calculations. Some people are eligible for a premium tax credit if they purchase insurance through the health insurance marketplaces (also called “Marketplaces”).
Marketplace is a platform for individuals, families or small businesses to purchase health insurance. It was created under the Affordable Care Act of 2010 to maximize compliance with the mandate that all Americans have some form of health insurance. If you buy health insurance through an exchange, you may receive income-based government subsidies to help pay for the premiums sold on the exchange. According to the HealthCare.gov website, you may qualify for a premium tax credit if your estimated income is between 100% and 400% of the federal poverty level for your family size. Through 2025, if your income exceeds 400% of the FPL, you may still qualify for a premium tax credit that reduces your monthly premium on a Marketplace health insurance plan.
It would be helpful if you also omitted expenses reimbursed by your insurance company or employer. To deduct medical expenses, you must itemize your deductions rather than choosing the standard deduction. Therefore, you’ll want to make sure your total itemized deductions exceed the standard deduction amount before making this decision.
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In tax year 2022, the standard deduction is $12,950 for individuals filing and $25,900 for married couples filing jointly, while in tax year 2023, the standard deduction rises to $13,850 for individuals filing and $25,900 for married couples filing jointly. The standard deduction rises to $27,700.
There is an exception to the 7.5% rule for people who run their own businesses. Among the many other tax breaks and benefits that self-employed workers can claim, you can deduct all premiums from your adjusted gross income, regardless of whether you itemize your deductions. However, you may not be eligible for this deduction if:
Self-employed individuals are also subject to restrictions based on the amount of their business income. In a given year, the self-employed person’s deduction may not exceed the income generated through his or her business activities. People who run multiple businesses can designate only one of them as the sponsor of a health insurance plan; you cannot add the income generated by multiple businesses to claim the maximum deduction. If you are self-employed, you can
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