A Medicare benefit tax statement is mailed each year between December and January. It shows Medicare Part A as qualifying healthcare coverage, meaning Part A meets the Affordable Care Act rules for health insurance.
The Affordable Care Act requires every person to have a qualified health insurance plan. Medicare is one health plan that meets this requirement.
The Medicare benefit tax statement is sent to individuals to confirm that their health plan with Medicare is qualifying, should the Internal Revenue Service (IRS) ask for evidence of coverage.
In this article, we discuss what a benefit tax statement is, why it is important, and how Medicare premiums and taxes.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
A benefit tax statement is a document used to declare to the IRS the type of healthcare coverage a person has.
At the end of each year, Medicare sends a 1095-B statement. This statement shows the IRS a person had qualifying health insurance that year. An individual may receive more than one statement if they have a secondary insurance policy.
Other plans that may count as qualifying health insurance include:
- employer insurance
- most Medicaid plans
- Children’s Health Insurance Program (CHIP)
- children covered under their parents
- many student health plans
- health coverage for Peace Corps
- most TRICARE plans and plans for veterans’ health through the Department of Veterans Affairs
- refugee medical assistance
Only a person who has Medicare Part A will receive a 1095-B, but the statement does not need filing along with taxes. Medicare does not require a copy of the statement, and a person should keep it with other tax documents.
Those who do not receive a statement may check their coverage through their account at MyMedicare.gov.
The Affordable Care Act requires all people to have qualifying health coverage.
Up until and through 2018, people without qualifying insurance could have been charged a fee. Beginning in 2019, a fee is no longer charged but the IRS continues to ask people to have qualifying health coverage.
If the IRS has a question about qualifying health insurance, a person needs a 1095-B to prove they had coverage.
If a person’s Medicare 1095-B statement is lost or damaged, a free replacement is available by calling Medicare at 800-633-4227.
Any health insurance plan purchased through the marketplace is qualified health coverage.
Individuals who had health insurance plans in place before the Affordable Care Act came into effect also have qualifying health coverage.
Medicare Part A and Medicare Part C, also known as Medicare Advantage, are both qualifying plans.
Non-qualifying coverage
There are plans that are not qualifying health coverage.
These can include:
- Medicare Part B when a person has this plan alone
- plans that cover only eye or dental care
- workers’ compensation
- plans that cover only specific diseases or health conditions
- plans that give only discounts on health services
Even though Medicare may not provide coverage for some medical treatments and services, they may still be classed as qualified medical expenses.
Examples may include services like dental, hearing, and eye care. These are types of services that, although not generally covered by Medicare, can be deducted as medical expenses.
Some qualified medical expenses can also count toward a Medicare Medical Savings Account (MSA), which is a type of Medicare Advantage plan. Expenses qualify when they are covered by Medicare Part A or Part B.
The administrators of Medicare, the Social Security Administration (SSA), can also send a tax statement. This indicates the number of benefits paid to a person during that year.
The Social Security tax statement is not the same as the statement sent from Medicare.
A person may also receive a Medicare Summary Notice (MSN). The MSN is sent every 3 months to people enrolled in Medicare. This statement lists all benefits and services paid in the last 3 months.
Most people who are working have a program to pay their insurance premiums with pretax dollars.
This does not happen with Medicare, and in some instances, a person may deduct their Medicare premiums.
Those who are employed can deduct Medicare premiums as they count as medical expenses when itemizing deductions.
A self-employed person can deduct health premiums, and it lowers their adjusted gross income (AGI). This includes premiums paid to Medicare, Medicare Advantage plans, Part D, and Medigap.
Medical expense deductions must be over 7.5% of a person’s AGI.
Eligible expenses that can be deducted include:
- Medicare and Medicare-product premiums
- coinsurance
- copayments
- deductibles
- dental care
- eye care
- hearing care
- long-term care
A person may like to consider seeking advice from a tax professional, as this could help to avoid penalties from the IRS.
Medicare sends a tax statement to beneficiaries between December and January of each year. The document shows a person had Medicare Part A during the tax year.
Medicare Part A and Medicare Advantage are classed as qualifying health coverage, under the Affordable Care Act.
A person who is self-employed after enrolling in Medicare may deduct many of the Medicare expenses, but it is not automatic.
Deductions can lower the adjusted gross income and can include out-of-pocket expenses like premiums, deductibles, coinsurance, and copayments.