Public Safety Officer Tax Deduction

With it being National Police Week, we thought we would share a quick tip for Police and any other Public Safety Officers. What we colloquially refer to as the “PSO Deduction” at Molen & Associates is a deduction for retired public safety officers. Mostly this applies to those in law enforcement and emergency services, though the definition can sometimes be more broadly applied.

How do I qualify?

In order to qualify for this deduction, you must pay for your health insurance premiums directly out of your monthly pension check from the city or county service that you retired from. You can’t use any work-arounds like having the full pension check direct deposited into your bank account and then having your health insurance premiums directly debited from that same account. It truly must be paid directly from the pension money.

Aren’t health insurance premiums deductible in other ways?

Yes, they’re deductible as a medical expense. However, in order to claim your health insurance premiums as a medical expense you first must exceed 7.5% of your adjusted gross income in medical expenses before being able to claim any of them. For example, if you have an AGI of $60,000 of fixed income in retirement, you must first exceed $4,500 in your deductible medical expenses. If your medical expenses are $5,000, only $500 of them exceed the threshold and are tax deductible. This $3,000 PSO deduction comes right off the top, it directly reduces your adjusted gross income, even if you don’t exceed 7.5% of your income in expenses.

How do I make sure I get this deduction?

Each government service has different requirements for how to apply for this deduction. First, I recommend you call us to confirm that you may qualify, and then we’ll give you some helpful tips when calling and speaking with your pension provider to request that your premiums be taken out of your pension. For some retired public safety officers, you may already have your health insurance premiums being taken out of your pension check and you just don’t know about the deduction. If that’s the case you must call us right away as you may be entitled to not only take this deduction moving forward, but also to amend some of your previous tax returns to claim this deduction and get more money back now!

If you have any questions about this deduction or any others, our tax professionals are available year-round. Give us a call today at (281) 440-6279 for your free 10-minute phone consultation.

Kevin Molen
Tax Advisory Manager