2008 Wisconsin Tax Benefits for Medical Care Insurance

Certain persons may claim a subtraction on their 2008 Wisconsin income tax returns for the amount paid for medical care insurance.

“Medical care insurance” means a medical care insurance policy that covers you, your spouse, and dependents and that provides surgical, medical, hospital, major medical, or other health service coverage.

A person who is employed and whose employer does not pay any part of the cost of the employee's medical care insurance may subtract 100% of the amount paid for the insurance.

A person who is employed and whose employer pays any amount toward the cost of the employee's medical care insurance may subtract 10% of the amount that person paid for medical care insurance in 2008. This percentage will increase to 25% for 2009, 45% for 2010, and 100% for 2011.

A person who is not self-employed and who has no employer may claim a subtraction for 66.7% of the amount paid for medical care insurance in 2008. This percentage will increase to 100% for 2009.

For employees and persons who have no employer and who are not self-employed, the subtraction cannot be more than the amount of the person's earned and unearned income.

If the cost of the medical insurance is provided under a flexible spending account, employee reimbursement account, or similar arrangement, the employee cannot claim a subtraction for the cost of that medical care insurance. The cost of the insurance has been provided on a pre-tax basis and such cost is already subtracted from income.

Self-employed persons may also claim a Wisconsin subtraction for 100% of the amount paid for their medical care insurance. However, the Wisconsin subtraction must be reduced by the amount claimed on the federal return as a self-employed health insurance deduction. This prevents a double deduction as the federal self-employed health insurance deduction is carried over to the Wisconsin return. Therefore, if a self-employed person claims the entire cost of the medical care insurance on the federal return, no further subtraction is allowed for Wisconsin.

For self-employed persons, the Wisconsin subtraction for medical care insurance is limited to the net earnings from the trade or business taxable to Wisconsin.

To prevent a double benefit, the amount of the Wisconsin subtraction for medical care insurance cannot be used when computing the Wisconsin itemized deduction credit.

Self-employed persons must file Wisconsin Form 1 (long form) or Form 1NPR (return for nonresidents and part-year residents) when claiming a subtraction for medical care insurance. Persons who are employees or who have no employer may claim the subtraction on Form 1A, 1, or 1NPR.

Last updated March 6, 2009