Definitions:

Pre-Tax Deduction - An amount excluded from income tax. Pre-tax deductions reduce your taxable income. They are deducted from your income before taxes, so you are not taxed on that money.

Post-Tax Deduction - An amount deducted after the tax is deducted. They do not reduce your federal, State and Medicare tax liability.

Household Income - Household income includes all income received by all adult household members during the year; including income that might be exempt from federal adjusted gross income. For a listing of income sources to include in HHI, see Income and Deductible Items.

Post tax premiums paid for any of the following types of health insurance plans may be deducted from household income to compute applicable credits:

1. Medical Insurance (including self-employed)
2. Dental Insurance
3. Vision Insurance
4. Prescription Drug
5. Automobile Insurance Premiums for medical coverage

Post tax Medicare premiums that are paid out of your pocket (not deducted from your Social Security or pension) may be deducted from household income to compute applicable credits. This applies to the following types of coverage:

1. Medicare Part A - Hospital Insurance
2. Medicare Part B - Medical Insurance
3. Medicare Part C - Medicare Advantage Program
4. Medicare Part D - Prescription Drug coverage

Premiums paid for the following types of plans may not be deducted from household income except to the extent deducted to arrive at adjusted gross income (AGI):

1. Premiums for long-term care
2. Premiums for income replacement coverage, such as long-term disability plans
3. Premiums for disability insurance policies
4. Premiums for policies for loss of life, limb, sight, etc.
5. Premiums paid by an employer with pre-tax contributions

Internal Policy Directive 2009-1 Income Tax Health Insurance Premiums

How to Report Your Social Security Benefits and Compute Your Household Income
Enter the "Amount paid by check or Direct Deposit" (item B) on line 18 on MI-1040CR to calculate your household income on the homestead property tax credit (MI-1040CR) and/or line 20 on your home heating credit (MI-1040CR-7).

Special Situations