To deduct premiums for Health Insurance from your income requires that your insurance be a “qualified plan”. This means that it is employer sponsored and has a Section 125 Agreement. If the business has not set up a Section 125, then problems with the IRS may lurk ahead.

Individual Health Insurance is not deductible and can not be employer sponsored. Employers are not suppose to pay any of the employees Health premiums for an individual policy. Premiums and claims paid could be deductible to the extent that they exceed the IRS annual percentage of adjusted gross income.

However, if the individual purchases a “High Deductible Health Plan” then they can open a Health savings Account. In 2009, an individual can deduct up to $3,000 in their account. If they are over 55 years old, then the deduction is $4,000. If the insurance is for family coverage, the allowable deduction is $5,950 and if the insured is over 55 years old it is $7,950.

All discussions about the IRS and tax deductions absolutely should be reviewed and cleared by a qualified CPA. Questions about which Insurance is allowable and Section 125 Plans can be directed to a qualified Insurance Agent.

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