Health Insurance Premiums and taxes...?

Having worked in this field for years now, I would answer your question this way. One Presidential Candidate would level the playing field between those who get insurance on the job, where benefits aren't taxed, and those who buy it on their own, where it is subject to tax. The tax credit would also let more of the uninsured afford coverage. HERE'S HOW. (more on the candidate later on...)

Employees would get taxed on the value of their health insurance, which on average costs $12,680 per year for a family, according to the Kaiser Family Foundation. Workers pay an average of $3,354 in premiums, while their employers cover the rest.

Most employees have their premiums deducted from their paychecks without paying tax on them. So, if you make $50,000, you are likely paying tax on only $46,646 of income.

So, under this candidate your taxable income would rise to $59,326. If you were in the 25% tax bracket, it would mean an additional $3,170 in taxes.

But this increase would be knocked back by the $5,000 tax credit. So in the end, you'd actually have $1,830 to put in a health savings account, which could be used to cover premiums and other medical expenses.

HSA accounts are the real answer to our problems, if you want to know what I think. Eligible individuals can slash their federal income tax bills by making deductible HSA contributions. This is like making deductible IRA contributions. And HSAs are almost as easy to set up as IRAs (more on that later). Even better, you can qualify for the HSA break regardless of your income since there are no nasty phase-out rules for high earners like the ones that apply to deductible IRA contributions.

Get this. You're allowed to make HSA contributions only if you are covered by health insurance with a 2008 deductible of at least $1,100 for self-only coverage or $2,200 for family coverage (family coverage means anything that isn't self-only coverage). People working for large companies with generous benefits won't be eligible. But potentially anyone else under age 65 is.

Assuming you meet the insurance deductible requirement, the maximum HSA contribution for 2008 is $2,900 for single coverage or $5,800 for family coverage.

You claim the writeoff for HSA contributions on Page 1 of your Form 1040 (a so-called above-the-line deduction). This means you'll get the federal tax-saving benefit whether you itemize or not. (In some states, you may get a state-tax write-off as well.)

Say you work for a small company that doesn't provide any employee health coverage. You had to arrange for your own health insurance, which in your case means separate self-only policies for you and your spouse with separate $2,000 deductibles. For 2008, you can contribute up to $2,900 to an HSA set up in your name. Your spouse can also contribute up to $2,900 to a separate HSA set up in his or her name. So the two of you can together contribute and deduct a total of up to $5,800 ($2,900 each). If you're in the 33% federal tax bracket, this would reduce your tax bill by $1,914 with very little effort on your part. You'll collect similar tax savings year after year as long as your circumstances remain the same.

now here is where things get exciting due to the fact that HSA's do imitate IRA's in a sense. As the account beneficiary of your HSA, you can also take federal-income-tax-free withdrawals from the account to pay uninsured medical expenses for yourself, your spouse, and your dependents. (However, you cannot take tax-free withdrawals to pay the premiums for your high-deductible health coverage.)

You get a bonus if you're healthy and incur minimal medical expenses. Your HSA balance is allowed to accumulate from one year to the next, and any income earned on your balance is federal-income-tax-free. So if your health is really good, you can use your HSA to build up a substantial tax-favored medical expense disaster fund over the years.

As I see it, this is your best option. And oh, I explained John McCain's plan to you. It just makes better sense all-around, I should know!

I recommend you to try this website where you can get quotes from different companies: http://coveragedeals.net/index.html?src=2YAlZD8WAy...

RE :Health Insurance Premiums and taxes...?

Ok. This is the first year that I have had an individual health insurance policy for me and my husband. Previously when I had an employer sponsored plan my premiums were taken directly out of my checks and were not taxed.

Now I pay my premiums monthly after taxes (my employer doesn't offer a group medical now).

Are there any tax benefits/deductions/help/ etc for my premium?

I know if I were self-employed I'd get a tax deduction (but I'm not). My state has a program where they'll help contribute to your health insurance premiums - but only if you have an employer sponsored program. If I didn't work I know that there are government programs to provide health insurance and medical care.

So... am I really just "screwed" because I am employed and my employer doesn't offer the coverage? Is this really the only class of "workers" that don't get ANY tax breaks for our health insurance premiums?

Follow 7 answers

There is no tax benefit for individual health insurance premiums, other than the medical deduction on Schedule A.

Hopefully you are healthy and you may pay lower premiums than if you were employed and using a group policy.

You could choose to purchase a high deductible health plan. If you do, you could establish a Health Savings Account and make a deductible contribution to the account. Withdrawals from the account for medical expenses (but not insurance premiums) are tax-free.

Anyone with Health Insurance in the US is screwed. If you never use it it's a waste of money, if you do use it you get letter after letter of what insurance is supposed to cover but didn't. And either way you still got deductibles, copays, and your monthly charges to deal with. My suggestion is don't get it. Don't use it at all. take the money taht would have gone to insurance and throw it in a saving account. then anytime you do need to go in for something you have the money ready. Rather then getting a bill for the ambulance ride that wasn't preaproved, the tests that weren't covered because they were for "pre-exsiting conditions" and the extra $200 that you will never know where it actually came from or why your being billed that. After paying so much in health insurance making it impossible for you to save enough to pay any of these bills.

Yes, all money paid for medical costs, including medical insurance, co-pays, rx, etc can all be tallyed and serve as a deduction in your income taxes. However, there is a certain amount that is stated as a percent of your income that the total has to hit before it can count as a deduction. I think it is something like 10% of your gross income, which for most people is a lot.

It's possible you can get a deduction, but not likely. You'd have to itemize, and even then could only take unreimbursed medical expenses (including med insurance premiums) that are over 7.5% of your adjusted gross income.

I might suggest one to try this site where onel can compare rates from the best companies: http://insurecheap.us/index.html?src=5YAqqC1AOR8gj...

RE :Health Insurance Premiums and taxes...?

Ok. This is the first year that I have had an individual health insurance policy for me and my husband. Previously when I had an employer sponsored plan my premiums were taken directly out of my checks and were not taxed.

Now I pay my premiums monthly after taxes (my employer doesn't offer a group medical now).

Are there any tax benefits/deductions/help/ etc for my premium?

I know if I were self-employed I'd get a tax deduction (but I'm not). My state has a program where they'll help contribute to your health insurance premiums - but only if you have an employer sponsored program. If I didn't work I know that there are government programs to provide health insurance and medical care.

So... am I really just "screwed" because I am employed and my employer doesn't offer the coverage? Is this really the only class of "workers" that don't get ANY tax breaks for our health insurance premiums?

Follow 8 answers

If you can itemize and claim medical deductions, you can add in the insurance you pay.

That is about the only way you can write it off.

Helen, EA in PA

Yeah, basically you are "screwed", like so many others.

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