Insurance Premium Tax Deduction3 min read
Every American citizen is entitled to claim tax relief on insurance premium tax. There are also many special rules for those individuals who buy insurance for the first time and get insurance as a member of their family, including children, grandchildren or parents. Claimants may also get tax relief on insurance premium tax if they get insurance as a gift.
There is no deadline for filing insurance premium tax claims for the current year or the next year. However, you may still file your claim for the current year, with the exception of July. This is because the insurance premium tax due for the current year will be due before the end of the june. Form DR 911 is required for submitting claims for the current year.
The provisions for insurance premium tax relief for the june are different than the provisions for the other months of the year. Those individuals who purchase insurance for the first time must get insurance from the insurance company at its regular rate on or before June 1st. If later, insurance purchased at the regular rate on or before July 1st will qualify for tax relief. There is also an exception made for self-employed individuals who buy insurance on or before July 1st but sell it on the same day of the year.
Some insurance premium tax benefits are given to insurance companies and/or local taxing entities for the support they give to pension and retirement funds. An insurance premium tax reduction can be given to participating municipalities in certain states such as Ohio, New Jersey, California, Illinois, Maryland, Florida, Arizona and Nevada. Participating municipalities include cities, town halls, fire stations, teachers’ associations, hospital associations and state university foundations.
Income tax returns also fall under an insurance premium tax reduction. This includes filers who itemize deductions. Those with incomes above a certain level are subject to a flat income tax rate reduction. Those with incomes below the poverty level are not subject to any income tax rate reduction. The rates are reduced so that middle-income taxpayers with children and college graduates will have the same saving whether they earn dividends or bonuses or both.
One of the many insurance premium tax deductions available to those filing their income tax returns is the interest paid for student loan debt. Interest paid for mortgages and student loans that are included in the borrower’s adjusted gross income is also deductible. Separate interests from dividends and capital gains are also deductible.
In order to take advantage of the insurance premium tax deduction, one must ensure that the total cost of the tax bill or the adjusted gross income does not exceed the applicable exemption. Those taxpayers filing joint returns are automatically entitled to an exemption of tax relief as their combined adjusted gross income is greater than the exemption. Those taxpayers filing sole proprietorship, also known as C corporation, can have their personal exemption raised by putting together a partnership, and all partners are subject to taxation on their personal assets. When the individual is not able to obtain an exemption for the self-employed in the first instance, he can always opt for an increase of his personal exemption.
It is important to remember that insurance premium tax deduction is only available during the tax year in which it was earned. It is not valid in the following tax year or the next year for the same business. Therefore, if you choose to purchase insurance for the current tax year, you are not eligible to receive any deduction. Also, insurance premium tax deduction is only applicable during the calendar year it was earned.