Ohio Department of Taxation Information Release

IT 2000-02 - Medical Care Expense Deduction - - ORC section 5747.01(A)(11) - March 8, 2000

We have received several inquiries pertaining to the medical care expense deduction under Ohio Revised Code ("ORC") section 5747.01(A)(11) in connection with medical care insurance premiums. Set forth below are those inquiries and the Department’s response to each inquiry.

Inquiry #1

May a "more than 2% shareholder of an S corporation" whose corporation provides medical care insurance for the shareholder (since the shareholder is also an employee of the S corporation) claim the ORC section 5747.01(A)(11)(a) deduction (the medical care insurance premium deduction on line 1 of the worksheet on the left hand side of page 18 of the 1999 Ohio form IT-1040 instructions) with respect to premiums paid by the S corporation-employer where such amounts are included in "total wages/compensation" on the 1999 IRS form W-2?

Response to Inquiry #1

Yes. If a "more than 2% shareholder of an S corporation" whose corporation provides health insurance for the shareholder-employee is eligible to claim the deduction for 60% of such amount on line 28 on the front page of the 1999 IRS form IT-1040 (commonly referred to as the "self-employed health insurance deduction"), then such individual will not be considered an "employee" for purposes of the Ohio medical care insurance premium deduction and can claim the Ohio deduction (on line 1 of the worksheet) to the extent such amounts have not already been deducted in computing federal adjusted gross income or Ohio adjusted gross income.

Inquiry #2

Is the portion of the medical insurance premium which a retired teacher, retired state employee, retired private sector employee or other retiree pays deductible (or line 1 of the worksheet) under ORC section 5747.01(A)(11)(a)? The retirement plan is also paying a portion of the premium or is providing the health care coverage.

Response to Inquiry #2

No. The portion of the medical care insurance premium which the STRS, PERS, privatesector plan, or other retiree pays is not deductible as a health insurance premium on line 1

of the worksheet since the retiree’s employer is subsidizing (or has subsidized) the health plan covering the retiree. However, such amounts would qualify for the ORC section 5747.01(A)(11)(b) net excess medical care deduction and would be part of the amount shown on line 2 of the worksheet.

Inquiry #3

A former employee is paying health insurance premiums under the "continuation coverage" rules required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The former employer is incurring only those costs, if any, required by COBRA. Can the individual claim the payment as a deduction under ORC section 5747.01(A)(11)(a)?

Response to Inquiry #3

Yes. The individual is not considered an "employee" for purposes of this deduction and can claim the Ohio deduction on line 1 of the worksheet.Reproduced below is ORC section 5747.01(A)(11):

1. Deduct to the extent not otherwise allowable as a deduction or exclusion in computing federal or Ohio adjusted gross income for the taxable year, the amount the taxpayer paid during the taxable year for medical care insurance and qualified long-term care insurance for the taxpayer, the taxpayer's spouse, and dependents. No deduction for medical care insurance under division (A)(11) of this section shall be allowed either to any taxpayer who is eligible to participate in any subsidized health plan maintained by any employer of the taxpayer or of the taxpayer's spouse, or to any taxpayer who is entitled to, or on application would be entitled to, benefits under part a of Title xviii of the "Social Security Act," 49 Stat. 620 (1935), 42 U.S.C. 301, as amended. For the purposes of division (A)(11)(a) of this section, "subsidized health plan" means a health plan for which the employer pays any portion of the plan's cost. The deduction allowed under division (A)(11)(a) of this section shall be the net of any related premium refunds, related premium reimbursements, or related insurance premium dividends received during the taxable year.
   
2. Deduct, to the extent not otherwise deducted or excluded in computing federal or Ohio adjusted gross income during the taxable year, the amount the taxpayer paid during the taxable year, not compensated for by any insurance or otherwise, for medical care of the taxpayer, the taxpayer's spouse, and dependents, to the extent the expenses exceed seven and one-half per cent of the taxpayer's federal adjusted gross income.

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If you have any questions, please call 614-433-7603 (TDY: 1-800-750-0750).