Under the current tax law, the exclusion amount is $3,000, and only the retiree who was a public safety officer can claim the exclusion.
According to Insurance premiums for retired public safety officers in IRS Publication 17:
Eligible retired public safety officers can exclude from income up to $3,000 of distributions from their eligible retirement plan that is paid directly to them and is used to pay for health insurance premiums.
When you're entering your Form 1099-R information from an eligible retirement plan in TurboTax Online, you'll come to the Do any of these situations apply to you? screen. Select the box to the left of This money was from being a public safety officer, then select Continue.
Later, you'll come to the Did the Pension Administrator Pay for Health Insurance? screen. Answer appropriately, then select Continue. On the next screen, you'll be asked to enter how much of your pension the plan administrator paid directly for health insurance.
Only the retiree can claim the exclusion, not their spouse. The qualified health insurance premiums have to be paid directly to the insurer. The premiums can be used for you, your spouse, or any dependents.
Distributions must be from an eligible plan, which includes any of the following:
- Qualified trust
- Section 403(a) plan
- Section 403(b) annuity, or
- Section 457(b) plan
