Insurance and your 2012 tax return
In New England, there are sap buckets hanging from the Maple trees, which means it's March, and time to fire up that sugar shack and make some syrup. Not that I actually get involved in the process, I leave that to the more capable members of my family and to my neighbors. Maple syrup season means it's also tax season. In a similar fashion, I leave that exercise to a certified accountant. But if you're a D.I.Y. type, or even if you have someone file your forms for you, it's prudent to be aware of how insurance impacts your taxes. Here is a summary of our tax coverage:
How your 2012 tax return will impact your future health insurance
- Under health reform, your earnings last year will be used in determining if you qualify for a government subsidy to buy health insurance in 2014. This means that this year's tax return could play a role in your coverage starting next year. (See: "Health insurance now tied to taxes.")
- In 2014, if you don't have health insurance, you'll be charged a penalty, also based on 2012 income.
- Subsidies are available for those who buy health insurance from state health exchanges, which are online marketplaces where you can compare and shop for plans. Aid is dependent on income and household size.
- Aid is available for those who earn up to 400 percent of the federal poverty level, though the size of the subsidy is greater for those who earn less.
- For a family of four, that means those earning between $23,000 and $92,000 in 2012 would be eligible for a subsidy, which would come in the form of a tax credit.
- The amount you receive in a subsidy can fluctuate. It's based on your modified adjusted gross income, which can change each year for those in certain professions or if you're self-employed. Or other events, such as changing jobs can impact your income.
- Your household size also plays a role. If you marry, divorce, have a baby or something else happens that changes the size of your family, the subsidy will change.
- If you fail to buy insurance by Jan. 1, 2014, and don't get it through your employer, the penalties start at $95 for the first year or 1 percent of your income, depending on which is greater, and increase until they hit $695 or 2.5 percent of annual income.
Scenarios that allow a deduction for car insurance
- You may be able to deduct some of your car insurance premiums if you use your vehicle for business, under certain circumstances. You can only qualify for these deductions if they total more than 2 percent of your adjusted gross income.
- If your car is stolen or damaged or totaled in an accident or by an act of nature, you may be able to claim a theft or casualty loss deduction.
- You can qualify for this write-off only if your auto insurance doesn't reimburse you for the full loss, if the loss is at least $100and if the total amount you lost in the year is higher than 10 percent of your gross income. (See: "Car insurance and taxes.")
Michelle Megna has worked as a reporter and editor for many daily newspapers, magazines and websites covering government, education, technology and lifestyles during her 20 years as a journalist. She joined Insurance.com as managing editor in October 2011.