How can I calculate my tax savings from filing my Obamacare Insurance premiums as a deduction?

[RHartness]

Let me give a bit of background.  Considering the increase in insurance premiums, yet again, I'm looking for alternatives to insurance.  I'm creating all necessary calculations that I need to make a reasonable comparison, but the last important number I need to factor in is how much I save on my taxes by filing my Health Insurance premiums as an appropriate deduction.

I'm not asking any of you guys to tell me how much I saved last year, but is there as reasonable, ballpark figure or easy formula I can use to calculate how much I saved in taxes by filing my insurance premiums as deductible expenses?

[TaxGuyBill]

Are you Self Employed?

If so, does your business have a profit?  Are you eligible for insurance through an employer (either your employer or a spouse's employer)?

Do you qualify for the Premium Tax Credit ("subsidies") for your insurance through the Healthcare Marketplace?

[RHartness]

I am self employed and I do not qualify for subsidies. Also, my wife is a SAHM so I am the single-income for our family and I have no other avenue for insurance, other than paying for it out-of-pocket.

[TaxGuyBill]

Because you are self employed, you are not subject to the 10% limitation (assuming your business has a profit that is more than the cost of insurance).

So your tax savings will usually be whatever tax bracket you are in.  So if you spend $10,000 for health insurance and you are in the 25% tax bracket for Federal and the 5% tax bracket for State, your total savings would be about $3000 ($2500 for Federal and $500 for State, assuming your State accepts that deduction).

However, there are MANY intertwining calculations on the tax return, so when one number changes (such as a $10,000 deduction for health insurance), it could affect other things on the tax return.  So that is just rough numbers.  For best results, enter the estimated numbers into TurboTax to see the result.

[Opus 17]

Almost nothing, probably.

Insurance premiums that you pay out of pocket with after-tax dollars (and not via payroll deduction) count as qualified medical expenses and are eligible to be taken as an itemized deduction.  But medical expenses are only deductible if they are more than 10% of your adjusted gross income.  In other words, if your income was $60,000, then the first $6000 of premiums are not deductible.  Above that may be deductible but you have to itemize your deductions and not use the standard deduction.  

This is true no matter what kind of insurance you have, as long as you pay the premiums after tax.  You can combine the deduction (subject to the above limits) with the Premium Tax Credit if you are eligible.

I don't know what your other options are, but employer-provided premiums are usually deducted pre-tax which is a greater savings than the itemized deduction.

Also note that there are several tax plans working their way through Congress that may or may not eliminate or reduce the deduction for medical expenses, and probably will increase the standard deduction.  So I'm not sure it's possible to make an accurate plan for 2018 yet.

[RHartness]

Thanks for responding.  I wasn't aware of the 10% bit.  Regardless, I meticulously track my deductible medical expenses and I actually spend about ~15-16% of my income in healthcare, so that means 5-6% of my income is deductible as medical expenses.  Any clue how to ballpark how much I will save from that 5-6%?

[RHartness]

Also, if you are wondering, I am considering using a "Christian Medical Share" program. These expense sharing services are quite different than insurance, but they do avoid the no-insurance tax penalty but aren't tax deductible.  This is why I'd like to ball park how much the tax write-off is from my taxes, from my insurance premiums.

[RHartness]

Sorry, one more comment, and I'll stop. 😉  See my response to the comment posted by @TaxGuyBill just below my question.