Preparing for Tax Season

As tax season rolls around once again, Medi-Share members may have questions about state and federal tax laws when it comes to income used for health care sharing accounts, as well as tax penalties levied by many states for non-participation in health insurance.  We’ll do our best to provide some basic, general information, but we always advise consulting a tax professional familiar with your state and federal tax laws if you have specific questions. 

Which Expenses Are Tax Deductible? 

First and foremost, because Medi-Share is a health care sharing ministry and not insurance, the IRS does not consider monthly share amounts to be tax deductible. Neither do they count as charitable contributions, unless you have donated above and beyond your monthly share toward Extra Blessings. Those donations do qualify for tax deductions as charitable contributions.  

How to Handle Health Savings Accounts 

A third question relates to Medical Savings or Health Savings Accounts (HSAs). These are personal savings accounts established strictly for paying certain health care expenses. HSAs make it possible for the account holders to deposit savings into that account and then withdraw it tax free, solely for the purpose of paying for qualified medical costs, such as deductibles and co-payments.  For the most part, for your savings account to qualify as an HSA per federal tax law, you must be enrolled in a qualifying High Deductible Health Plan. Because Medi-Share is not insurance, and monthly share amounts are not considered qualified medical expenses as defined by IRS rules, then money that Medi-Share members set aside in medically earmarked savings accounts does not qualify.  

Tax Penalties Levied in Some States 

A final question relates to federal or state tax penalties for not being enrolled in insurance, as was required by the Affordable Care Act beginning in 2010. The federal penalty has since been eliminated. See further information from the IRS website here.  

However, several states did enact or retain tax penalties, some of which provide for a process to have the penalties waived with an exemption form. Below is a list of these states with links to their specific laws:  

• • California: imposes a penalty for those without coverage based on income and household size. 
         - Instructions 

• • Indiana 

• • Massachusetts: continues to enforce penalties for uninsured residents, based on the states’ own health insurance mandate established before the ACA. 
         - Form 1 
         - Schedule HC 

• • Missouri 
         - Form 

• • Montana 
       - Tax-Exempt Entities 
       - Medical Care Savings Account Info 

• • New Jersey: individuals without health insurance must pay a fine when filing state taxes. 
         - Exemption 
         - Form 

• • Rhode Island: continues to enforce a state penalty similar to the previous federal mandate. 
         - Must include the FORM IND-Health form 

• • Vermont: while the state has an individual mandate, it does not currently impose a financial penalty for noncompliance. 
         - Form IN-111 
         - Booklet 

• •  District of Columbia: similar to other states with mandates, implements a penalty for uninsured residents. 
         - D-40 Individual Income Tax Return 
         - HSR 
         - Booklet 

 
We’ve linked each of these states’ rules and form requirements from this blog post; however, these links may not be up to date with 2026 information yet, so please check the links for updates and consult a local tax professional to ensure you are compliant with the latest regulations. 

Practice Wise Stewardship During Tax Season 

While we do attempt to understand the rules and their implications on behalf of our members, we are not tax experts, so we always recommend that you consult a tax professional, especially if you have additional questions. Just as we are called to be good stewards of our physical health, so are we to steward our finances well, and that includes doing our homework and abiding by all legal requirements during tax season.