You may take a deduction for certain health insurance premiums on line 18 instead of IA 1040, Schedule A. Your IA 1040, Schedule A cannot contain any health insurance premiums which are used as a deduction on line 18. Typically, employer health insurance premiums are made on a pre-tax basis when they are deducted from wages. These premiums are not eligible to be claimed on line 18 or IA 1040, Schedule A.
Enter 100% of the amount paid for:
- health insurance premiums paid with post-tax dollars
- supplemental health insurance, such as:
- Medicare B supplemental medical insurance
- Medicare D voluntary prescription drug insurance
- dental insurance premiums paid with post-tax dollars
- long-term nursing home coverage premiums paid with post-tax dollars regardless of age
Do NOT include:
- “Medicare tax withheld” on your W-2
- premiums paid with pre-tax dollars
- premiums which are later reimbursed, in the same tax year
Federal Health Insurance Credits
Any Excess Advance Premium Tax Credit repayment from the 2021 federal form 1040, Schedule 2, line 2 will be entered on IA 1040, line 18 in the year paid. Any repayment calculated on your 2022 federal return cannot be included on the 2022 IA 1040, line 18.
The Net Premium Tax Credit from the 2022 federal form 1040, Schedule 3, line 8, and the Health Coverage Tax Credit from the 2022 federal form 1040, Schedule 3, line 12c will be reported as Other Income on the 2023 IA 1040. The federal Net Premium Tax Credit and the federal 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 certain health insurance premiums on IA 1040, line 18, 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.
The Iowa expanded instructions for this line and IA 1040, line 14 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 pre-tax basis. Pre-tax 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 pre-tax 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 their 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. For taxpayers who are not self-employed, 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.