Where do I enter the Michigan State medical portion of the auto insurance premium?

[ToddL · Accepted solution]

Edited 3/20/16 at 5:15 AM PT

You enter the medical portion of the auto insurance premium in the " Michigan's Homestead Property Tax and Home Heating Credits" interview.

Why?  Because, Michigan's Homestead Property Tax and Home Heating Credits  depend on your household resources, not your taxable income.

In calculating your household resources, MI allows you to deduct the medical insurance portion of your automobile insurance premiums, if any. This is identified on your insurance bill as PIP (Personal Injury Protection). PIP is an extension of car insurance available in some U.S. states that covers your medical expenses.

The auto insurance surcharge you pay because of Michigan's auto insurance no-fault law is not "medical insurance for you".  It is a cost passed on to policyholders (in whole or in part)  by the auto insurance company to pay their assessment for the costs of catastrophic medical claims.

From IRS Publication 502 (2015), Medical and Dental Expenses

"You can include in medical expenses insurance premiums you pay for policies that cover medical care (for you and members of your family)." 

All auto insurance companies operating in Michigan are assessed to cover the catastrophic medical claims occurring in Michigan. Although those assessments are generally passed on to auto insurance policyholders, they are  not insurance premiums the policyholder is paying for policies that cover (the policyholder's) medical care

[psmbell]

IF what you say is true for Michigan returns, then why doesn't TurboTax eliminate the opportunity for errors by removing the question from its Michigan Tax Interview, or at least noting that nobody would likely be able to properly use this item as a deduction??  Since you are a TurboTax TaxPro, a word from you might go a long way in motivating them to correct their thoughts on this issue.

[nateedogg32]

I would like a answer to this as well

[ToddL]

Where are you seeing this in the state interview?

[nateedogg32]

??

[bwa]

The question is appropriate because, although the Michigan no-fault premium may not be deductible, Michigan PIP is.

[ToddL]

Actually, I went through the MI state interview (desktop and online) and couldn't find anything that referred to a medical insurance deduction. Any help on finding it? The Catastrophic Loss surcharge is different from PIP.

[bwa]

Someone familiar with MI taxes would have to answer that.  I don't live in MI so I don't have the MI state module.

[ToddL]

psmbell & nateedogg32: where did you see this in the MI state interview? What section and how was it titled?

[nateedogg32]

What do I enter in medical portion of auto insurance?This falls under medical insurance or HMO premiums reduced household resources which I think is under HOMESTEAD CREDITS.

[psmbell]

To TurboTaxToddL:  You will find the relevant area under "Medical Insurance or HMO Premiums Reduce Household Resources" in the State Taxes interview for Michigan.  It states, "We have already included medical insurance premiums you previously entered on your federal return.  If your auto insurance includes medical payments, enter the medical care portion of your auto insurance premiums here."  My policy lists Personal Injury Protection as having three sub-headings:  Medical Benefits, Work Loss Benefits, and Survivors' Loss Benefits.   The premium for PIP is listed, but it does not have a breakdown for each sub-heading.  I have checked with my insurance provider several times, and they insist that there is no separate breakdown of the PIP premium for the three subheadings (in this particular case, for the "Medical Benefits" portion of the Personal Injury Protection).  If my insurance provider is typical of other insurance companies in Michigan, and if the PIP as a whole is not the "medical care portion of your auto insurance premium", and the "Medical Portion" cannot be broken out separately, what good is this question in the MI state interview?

[ToddL]

Good point. Unfortunately the insurance company is not providing the detail required by the state's tax law. Your options are to claim 1/3 of the PIP premium as Medical Benefits, or claim the majority (80%?) of the PIP premium as Medical Benefits. My rationale for the 80% approach is that, of the three coverages included in PIP, medical costs are almost certainly the most costly.

[psmbell]

Great reply!  Makes a lot of sense.  Thank you!

[ToddL]

Glad I could help!