What constitutes a "Qualified Health Insurance Premiums" for Missouri?

[ajalgiere1]

How do I know if my health insurance is exempt from taxes?

[KarenM90]

It depends.  If your Health Insurance Premiums are paid all or in part by your employer, it is likely that they are paid from your "pre-taxed" wages and are therefore "exempt from taxes."  Here is a link with more information:  Health Insurance Paid by my Employer

If you pay for your own premiums you may be able to take them as an itemized deduction if you have sufficient medical expenses and itemized deductions.  You would be able to deduct the portion of  Health Insurance and other qualified medical expenses that are in excess of 7.5% of your adjusted gross income.  Here is a link that describes in more detail what can be deducted and what cannot.  2019 Medical Expenses

If you pay for your own premiums and you are self-employed, you may be able to deduct your premiums as "self-employed health insurance. This deduction is limited by the net income of your self employed business.  Here is a link with more details on this deduction:  Self Employed Health Insurance Deduction

[travmo86]

What is 'qualified' specifically? I paid out of pocket for short-term coverage all year. Is this ACA compliant only insurance, or is this any health insurance that is not paid pre-tax? There would be no document given (like the 1095) for this situation.

[JamesG1]

Qualified Health Insurance Premiums are any and all payments that you made for health insurance and that are deductible on your Federal tax return. 

Health insurance premiums made on a pre-tax basis are not deductible on either tax return.

[sjh518]

Can anyone explain why the qualified insurance premium deduction in Missouri is reduced when the premiums are paid as a deduction from your SS check?  The deduction gets reduced by the same percentage as the SS benefits are taxed.  This makes no sense to me as the SS benefits are separate from Medicare.  My spouse pays Medicare premiums but does NOT get SS benefits and gets a 100% qualified insurance deduction for Missouri.  Nobody at the MO Dept of Rev can answer my question, not can anyone at the SSA.

[ThomasM125]

They won't let you deduct the insurance premiums that are paid from income that is not taxable. Since your spouse does not receive social security, her insurance premiums are being paid out of taxable income. 

[sjh518]

Do you know why the qualified insurance deduction in Missouri is reduced if they are paid out of SS benefits?  This does not make sense to me because if you paid them separately they are 100% deductible.  I understand that my SS benefits are not 100% taxable, but still don't know why that impacts my qualified health insurance deduction.  Thanks for your help.

[sjh518]

Thanks for your reply.  But why does it matter whether the premiums are paid out of SS or just out of your own pocket?  The cost of the insurance is the same either way.  They don't ask me where the premiums are paid from if not from a SS check.  Just makes no sense to me.

[ThomasM125]

All or a portion of your social security income is not taxable. Most tax deductions are only allowed against taxable income. So, if you pay the insurance from the portion of your social security income that is not taxable, you would be getting a tax deduction from income that is not taxable.

[sjh518]

Thanks for the quick reply.  Your response explains this from a taxing authority perspective, but the prior year (2019) when my spouse did not receive SS benefits she also paid Medicare premiums and got a 100% deduction in Missouri.  Just because she started to receive SS benefits in 2020 the deduction becomes limited??  Just a strange way for the state to be looking at it.  Medicare premiums are deducted from her SS check for simplicity purposes (two transactions combined into one, which makes sense), not because that's the source to pay the premium.  She would have to pay that premium regardless of whether she got SS benefits or not.  I will try to find someone in the Missouri DOR to make my point and see if they have any flexibility to consider my position.

[ptaalseth]

The worksheet form 5695 Qualified Health Insurance Premiums Worksheet for MO-A says "Complete this worksheet and attach it, along with proof of premiums paid, to form MO-1040 if you included health insurance premiums paid as an itemized deduction or had health insurance premiums withheld from your social security benefits."  So, it appears that if you took the standard deduction on the federal tax and did not have premiums withheld from Social Security, you cannot get a Missouri reduction. The Turbo Tax software is entering data on this form for me even though I took the federal standard deduction. This seems incorrect.

[BrittanyS]

Missouri would accept health insurance premiums as an allowable expense even if you took the federal standard deduction.  The requirement to claim the premium is that the premium can not be a pre-tax deduction on your paystub.

A pre-tax deduction is taken from your income before any federal, state, or local taxes are deducted.  You can determine if your premium was a pretax deduction by looking at your pay stub.  A few examples of pre-tax deducted insurance premiums would be:

• Health insurance premiums paid by the employer such as dental and vision, and accidental health benefit premiums (Aflac)
• Employee contributions to savings account for Medical expenses (HSA and FSA)

Pre-tax deductions are not claimed on the return because the expenses were already excluded from income before being taxed.

@ptaalseth 

[sjh518]

I will add one modification to the deductibility of Qualified Insurance premiums on your Missouri tax return. If the premiums were for Medicare and were deducted from your Social Security payments, you can only deduct the percentage that your Social Security benefits were taxed (eg., 85% for some taxpayers).

[ptaalseth]

Phone conversation with MO Department of Revenue on 2/7/2023 confirms that MO 5695 can only be used under the two conditions listed at the top of the form: 1) health insurance premiums paid listed as an itemized deduction on federal income tax or 2) health insurance premiums withheld from social security benefits. I spoke with someone named Crystal, who had to discuss with her supervisor. The confirmation number for the call was 5EB319A19765.   

[Linda H]

If you follow the form, it states "Enter the total of all other health insurance premiums paid, which
were not included on 4Y or 4S" (which is:  health insurance premiums withheld from your social
security income.)  In my case, the only health insurance premiums withheld from my Social Security income are Part B. I pay out of pocket a medical supplement and also a part D prescription premium. I enter the total of those premiums because they are not withheld from my social security and I do not itemize, so they are not deductions as a part of itemization. They are also not reimbursed by any employee retirement benefit, they are totally out of pocket and not deducted anywhere else.