It is typically to your advantage to take this deduction on line 18 instead of Schedule A, due to the Schedule A reduction of medical and dental expenses by 10% of federal AGI, 7.5% if taxpayer or spouse is 65 or older. Schedule A cannot contain any health or dental insurance premiums which are used as a deduction on line 18.
Enter 100% of the amount paid for:
- health insurance premiums
- supplemental health insurance, such as:
- Medicare B supplemental medical insurance
- Medicare D voluntary prescription drug insurance
- dental insurance premiums
- long-term nursing home coverage premiums
Do not include:
- “Medicare tax withheld” on your W-2
- premiums paid with pretax dollars
- premiums which are later reimbursed, in the same tax year
Federal Health Insurance Credits
Any Excess Advance Premium Tax Credit Repayment from line 46 of the federal 1040 will be entered on line 18 of the IA 1040 in the year paid. Any repayment calculated on your 2016 federal return cannot be included on line 18 of the 2016 IA 1040, but will be entered on line 18 of the 2017 IA 1040.
The Net Premium Tax Credit from line 69 of the 2016 federal 1040 and the Health Coverage Tax Credit from line 73c of the 2016 federal 1040 will be reported as Other Income on line 14 of the 2017 IA 1040. The Net Premium Tax Credit and the Health Coverage Tax Credit are reportable income to the extent these credits were a reimbursement for health insurance premiums deducted from Iowa income in a prior year.
The Iowa 1040 departs from the federal 1040 in the treatment of health insurance premiums by allowing taxpayers to elect to deduct qualifying health insurance premiums as an adjustment to Iowa gross income. The Iowa return allows a deduction for health insurance premiums on line 18 of the IA 1040, rather than reporting those same premiums as a medical expense deduction on the IA 1040 Schedule A for Iowa Itemized Deductions.
If the deduction is taken on the IA 1040 Schedule A, then the federal tax guidance should be followed when addressing the complications due to the impact of the federal excess advance premium tax credit repayment, the net premium tax credit, and the health coverage tax credit.
However, if the deduction is taken on line 18 of the IA 1040, then the IA 1040, rather than the Iowa Schedule A, must reflect the impact of the federal excess advance premium tax credit repayment, the net premium tax credit, and the health coverage tax credit. The Iowa expanded instructions for lines 14 and 18 of the IA 1040 set forth the Department’s guidance for the correct reporting of these amounts.
Premiums Paid with Pretax Dollars
This deduction is not available to individuals who have paid health or dental insurance premiums on a pretax basis. Pretax occurs when an employer subtracts the amount of the health or dental insurance premium from an employee's gross wages before withholding federal and state income taxes and calculating FICA. See your payroll department if you do not know whether or not your health or dental insurance was paid on a pretax basis.
The federal Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage paid by the employer in box 12 of the W2, code DD. The code DD amount is paid by employers and is not used for tax purposes.
Married Separate Filers:
If one spouse is employed and has health or dental insurance premiums paid through his or her wages, that spouse will claim the entire deduction. If both spouses pay health or dental insurance premiums through their wages, each spouse will claim what that individual paid.
If both spouses have self-employment income, the deduction for self-employed health or dental insurance must be allocated between the spouses in the ratio of each spouse's self-employment income to the total self-employment income of both spouses. If health or dental insurance premiums are paid directly by one spouse, that spouse will claim the entire deduction. If both spouses paid through a joint checking account, the deduction will be allocated between the spouses in the ratio of each spouse's net income to the total net income of both spouses. For this net income calculation, do not include line 18, the health or dental insurance deduction. (Examples of how to prorate)