Dentist as W2, paying for my own health, malpractice and disability insurances. Can they be tax deductible?

[deepark]

Hello,

I am a dentist in NY - working in two different offices but both as an employee (W2).

Neither of the offices pay/offer health insurance, malpractice insurance or disability insurance

but still require employees to have them. I will be paying nearly 10k for all three insurances per year,

paid separately from my paycheck, after tax. I was wondering if these expenses can be tax deductible.

I'd appreciate any advice! Thank you. 

[xmasbaby0]

If you are a W-2 employee then you cannot deduct any job-related expenses on your federal tax return.   You may be confused about using the cost of health insurance on a Schedule C if one is self-employed.   If you are a W-2 employee, then you can enter the premiums you pay for health insurance on a Schedule A if you are itemizing deductions. It can be entered as a medical expense.  But the medical expense deduction is very hard to use.

https://ttlc.intuit.com/questions/4482873-which-federal-tax-deductions-have-been-suspended-by-tax-re...

MEDICAL EXPENSES

The medical expense deduction has to meet a rather large threshold before it can affect your return. The amount of medical (including dental, vision, etc.)  expenses that will count toward itemization is the amount that is OVER 7.5% of your adjusted gross income. You should only enter the amount that you paid in 2020—do not include any amounts that were covered by insurance or that are still outstanding.  Of course, your medical expenses plus your other itemized deductions still have to exceed your standard deduction before you will see a difference in your tax due or refund.

To enter your medical expenses go to Federal>Deductions and Credits>Medical>Medical Expenses

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

2021 STANDARD DEDUCTION AMOUNTS

SINGLE $12,550  (65 or older + $1700)

MARRIED FILING SEPARATELY $12,550  (65 or older + $1350)

MARRIED FILING JOINTLY $25,100  (65 or older + $1350 per spouse)

HEAD OF HOUSEHOLD  $18,800  (65 or older +$1700)

Legally Blind + $1350

[Opus 17]

Premiums you pay for personal health insurance are always deductible as a schedule A itemized deduction, and you may also be eligible for a premium tax credit depending on your income and family size.

Work-related expenses including liability insurance and malpractice insurance are no longer deductible for W-2 employees for tax years 2018 to 2025.  This is something you need to negotiate with your employer, and if your employer is not willing to budge you may want to find a different employer. You could also have a discussion with the state agency that regulates the dental and medical professions in your state. You might even have a chat with the state labor board, because they might have an issue with a W-2 employee being required to pay significant out-of-pocket costs as a condition of employment.

If you do end up remaining at your present jobs and paying the premiums, you can deduct them as itemized expenses on your New York State tax return, but they are not deductible on your federal return. You will enter them on the work related expenses section of the deductions and credits page in TurboTax, and they will flow to the state tax return even though they are not eligible on the federal tax return.

[deepark]

@xmasbaby0 

Oh no...I had a 1099 job before briefly. I should have kept it!!!

Thank you for your input! 

[deepark]

@Opus 17 

This is a good news! I thought it was absolutely not allowed to deduct health insurance premiums, and other work related expenses under the new law. Thank you so much. I 

[Hal_Al]

As previously stated, you as  a W-2 employee cannot deduct you job expenses, including liability insurance or even your dental license.

BUT, your employer is allowed to reimburse you for job expenses.  The reimbursement is tax free to you as long as it is done under an "accountable plan"; basically you submit itemized expense reports.  Furthermore, your employer gets a tax deduction for those expenses (essentially a double tax benefit; tax free to you, deductible to them).   As @Opus 17  suggested, you should considered renegotiating your compensation package,  even considering becoming a 1099-NEC (contract) employee.

Be aware,  there a limitations on the QBI (qualified business income) deduction for workers who switch from W-2 to 1099,  with the same employer.  The QBI is in addition to expenses deductions

[Opus 17]

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@deepark wrote:

@xmasbaby0 

Oh no...I had a 1099 job before briefly. I should have kept it!!!

Thank you for your input! 

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Actually, this would not help much.  If you have an expense that is shared between self-employment and W-2 employment, you have to allocate the cost on a pro-rated basis.