How do I calculate insurance premium tax?

In the United States, consumers do not pay any additional tax on health insurance premiums. However, your insurance premiums may affect your income tax burden, depending on how your premiums are paid.
Next Up: How are variable annuities taxed at death?
Employer-Sponsored Health Care

Participating in an employer-sponsored health plan can reduce your taxable income in a number of ways. Many employers offer health insurance benefits to employees through a payroll deduction program. In exchange for coverage under your employee health plan, your employer deducts a certain amount from each paycheck throughout the year. Because premium dollars are deducted before your income tax withholding, your total taxable income for the year is reduced.

If your employer pays for your medical coverage plan entirely, you are not required to include these premiums in your taxable income for the year. Even if you must pay for your insurance premiums out-of-pocket and your employer reimburses you later, your premiums are not included in your taxable income.
Out-of-Pocket Premiums

If you must pay for your health insurance premiums with your own money and are not reimbursed by an employer, your premiums may be tax-deductible. Because out-of-pocket expenses are paid with after-tax dollars, the IRS allows for a deduction of premiums and other nonreimbursed medical expenses that exceed a given threshold.

For 2015, itemized medical expenses, including insurance premiums, that exceed 10% of your adjusted gross income (AGI) are tax-deductible. If you incur $13,000 in medical expenses and have an AGI of $100,000, for example, then $3,000 of your medical expenses are tax-deductible.
Premium Tax Credit

To help individuals and families with moderate incomes afford health coverage, the Obama administration implemented a new premium tax credit program. To be eligible for the premium tax credit, taxpayers must enroll in a health plan through the insurance marketplace, be ineligible for minimum essential coverage, such as Medicare, Medicaid or employer-sponsored plans, and have annual income between 100 and 400% of the federal poverty threshold.

The premium tax credit varies based on your income and the amount of your monthly premium. The more money you make, up to the maximum eligible income, the greater the percentage of your income you can pay in premiums before the tax credit kicks in. This way, those who earn very little get the greatest amount of assistance because they need it the most.

Trade FX on the web’s trusted trading platform
London Capital Group offers clients an advanced MT4 trading platform featuring cutting-edge security. Trade FX, stock indices and commodities across multiple devices. Expert daily market analysis and 24hr support. Losses can exceed deposits. Click here to register.