When filing taxes, reducing your liability is more about what you know than how skilled you are. Yet many taxpayers miss valuable deductions simply because they're unaware of them. Among the most commonly overlooked deductions are those tied to insurance premiums and medical expenses. While the 2017 Tax Cuts and Jobs Act (TCJA) removed many deductions, the ones discussed here remain intact.

1. Disability Insurance

Disability insurance is one of the most commonly missed insurance-related deductions. This type of policy can provide supplemental income if you're unable to work due to disability. However, t▨he ru🐲les surrounding its deductibility are complex.

The 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) permits self-employed taxpayers to deduct “overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness.” However, “You can’t deduct premiums for a policy that pays for lost earnings due to sickness or disability.”

If you deduct the premiums, any benefits you receive from the policy will be considered 澳洲幸运5官方开奖结果体彩网:taxable income. If you pay the premiums out of pocket, however, the benefits you receive are typically tax-free. Be aware that if your employer covers your disability insurance, the benefits will likely be taxed as income. 

2. Health Savings Accounts

Health Savings Accounts (HSA) are another tax-advantaged benefit often underutilized. If you're enrolled in a high-deductible health plan, you can contribute to an HSA. Contributions are tax-deductible, and the funds grow tax-deferred. Best of all, withdrawals used for qualified medical expenses are tax-free. 

All HSA contributions, up to the maximum permitted by law, are tax-deductible, even for those who do not itemize on Schedule C. For the 2025 tax year, you can contribute up to $4,300 if you have a self-coverage plan or $8,550 for an individual with family coverage—with an additional $1,000 contribution allowed for taxpayers over the age of 55. Employers can also contribute to your HSA. Still, the total combined contributions (yours and theirs) cannot exceed the annual limits.

3. Medical Expenses

You can deduct medical expenses, but only the portion that exceeds a specific percentage of your adjusted gross income (AGI). For tax year 2024, this threshold is 7.5% of your AGI. If your medical expenses are close to this threshold, you may want to consider scheduling procedures before year-end to qualify for the deduction. 

If you’re below the medical expense deduction threshold and plan to schedule medical procedures next year, you could try scheduling them this year instead to reach the deduction threshold (be sure to calculate this accurately before having the procedures). Keep in mind that if your insurance company reimburses you the following year, you will have to declare the amount of the deduction that was reimbursed as income that year. 

For instance, imagine you deducted $17,000 for surgery in oneꦍ year, and your insurance 🅰company sent you a $10,000 check for the surgery the following year. The $10,000 would have to be declared as income in the year when the check arrives.

If there’s a chance that you may get medical expenses covered by your insurance company in the future, you’re better off not declaring this deduction. You can always submit an 澳洲幸运5官方开奖结果体彩网:amended return for the year when you would have received the deduction if your 澳洲幸运5官方开奖结果体彩网:insurance claim is denied.

4. Unemployment/Workers’ Compensation

It’s important to distinguish 澳洲幸运5官方开奖结果体彩网:unemployment compensation paid through a state unemployment agency from 澳洲幸运5官方开奖结果体彩网:workers’ compensation, which is awarded to wo♋rkeܫrs who cannot perform their duties as a result of an injury. 

Unemployment benefits are always taxable, as they are considered a replacement for regular 澳洲幸运5官方开奖结果体彩网:earned income. You will receive a 澳洲幸运5官方开奖结果体彩网:Form 1099-G listing the total unemployment compensation you received throughout the year, and this amount should be reported on IRS 澳洲幸运5官方开奖结果体彩网:Form 1040. Workers’ compensation benefits that you receive should not be declared as income. This also includes survivor’s benefits.

5. Deductions for the Self-Employed

澳洲幸运5官方开奖结果体彩网:Self-employed taxpayers and other business entities can deduct business-related 澳洲幸运5官方开奖结果体彩网:insurance premiums, including health and 澳洲幸运5官方开奖结果体彩网:dental insurance premiums and long-term care premiums.

If you're self-employed and use your vehicle for business purposes, you can also deduct vehicle insurance as part of your actual expenses (if you're not using the standard mileage rate). Keep records of all premiums paid and ot🌺her eligible business expenses like equipment and home office costs, to maximize your deductionsꦚ.

6. Other Qualifying Plans

澳洲幸运5官方开奖结果体彩网:Qualified plans aren’t the only type of retirement savings vehicle that can be funded with tax-deductible premiums. Defined-benefit plans known as “412(e)(3) plans” can provide substantial deductions for small-business owners looking to catch up on their retirement savings and receive a guaranteed income stream in the future. 

These plans are funded solely with insurance products, such as 澳洲幸运5官方开奖结果体彩网:cash value life insurance or fixed annuity contracts. The plan owner can deduct up to hundreds of thousands of dollars in contributions to this plan every year.

Participants in qualified plans, like a 401(k), may also purchase limited life insurance coverage, but it must meet IRS requirements to be considered "incidental." This means the amount used to purchase life insurance cannot exceed 50% of the employer's contribution to the plan. Life insurance death benefits paid out of qualified plans enjoy tax-free status, and this insurance can be used to pay the taxes on the plan proceeds that must be distributed when the participant dies.

7. Life Insurance

澳洲幸运5官方开奖结果体彩网:Life insurance can help you provide a measure of family security for your loved ones if something should happen to you. They are generally not deductible, but there are exceptions. Premiums are deductible as a business-related expense if the insured is an employee or a corporate officer of the company and if the company is not a direct or indirect beneficiary of the policy.

Although death benefits for business-related beneficiaries are often tax free, there are certain situations in which the death benefit for corporate-owned life insurance can be taxable. However, employers offering group term life coverage to employees can deduct premiums that they pay on the first $50,000 of benefits per employee, and amounts up to this limit are not counted as income to the employees. 

The Bottom Line

Insurance-based tax deductions are often overlooked, but they can provide substantial savings. Whether you're self-employed, a small business owner, or an individual taxpayer, it's important to be aware of the 澳洲幸运5官方开奖结果体彩网:tax benefits available through your insurance pꦦremiums. To ensure you're claiming all the deductions you're entitled to, consult a tax professional or accountant who can guide you through the process.