Tax Tip: Public Safety Officer Health Insurance Deduction

For retired EMS/FIRE/POLICE, the deduction for Public Safety Officer (PSO) medical insurance premiums is still available under the Tax Cuts & Jobs Act.  If your medical insurance premiums are deducted from your pension you may be eligible to exclude up to $3,000 of pension income.  This benefit was a result of the Pension Protection Act of 2006.

Q.  How can you find out if health insurance premiums are being deducted from your pension?

A.  Review your pension statement and look for an amount being deducted for health insurance (AETNA, HIP, EMBLEM, etc.).

Q.  How can you determine if the premium (up to $3,000) was deducted from your tax return?

A.  For tax years prior to 2018, go to line 16b of Form 1040 and look for the letters “PSO”.  If PSO is indicated, the premiums were deducted.  If PSO is not indicated, compare the total dollar amount listed on line 16b with your 1099R box 2a from the pension system.  Generally, if the amounts are the same, your health insurance premium deductions may not have been deducted.  For tax year 2018, look for the letters “PSO” on line 4a of form 1040.

Q.  Is there anything that can be done if the health insurance premiums were not deducted?

A.  Yes, the individual could amend their tax returns for any tax year that is still open.  As of today’s date, the individual is still able to amend 2015, 2016, and 2017 tax returns.  Whether to amend or not may depend on the amount of the health insurance premiums being deducted from the pension and other factors.

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