Keep in mind, your health insurance premiums can't be deducted if they're taken out of your paycheck as pre-tax dollars. However, after-tax health insurance premiums are deductible, but they still are subject to a limitation of 7.5% of your AGI. If you're self-employed, you may deduct a portion of your health insurance premiums as an adjustment. The self-employed deductible portion is 100% in 2007.
United States - 3 Answers
Random Answers, Critics, Comments, Opinions :
1 :
Ask your employer. They will tell you. Actually they should provide a form for you to sign every year verifying your benefit selections and how you want to have your healthcare premiums treated. Nearly all healthcare insurance through a job are part of a Section 125 plan and are deducted pre-tax. You generally have the option to pay them with tax paid dollars but I'm at a loss to explain how that could be beneficial to anyone.
2 :
If you have to ask your employer, your pay statements are NOT well designed. MY pay statement has 3 sections under deductions: Pre-Tax Deductions, Taxes, and Other deductions. Which section is your insurance deduction under? If that doesn't help, you will have to ask your employer. You mentioned self-employment. If you are self employed and need to ask, you NEED an accountant DESPERATELY.
3 :
OKay, it's nice that you read a publication somewhere (it made for a funny looking question since you quoted from the pub). When you get your W-2, look at box 14, many companies list the amount of health care benefits there. Also Compare the amount in box 2 (your wages for social security purposes) and the amount shown as ytd wages on your last paycheck stub. If your health care was pre-tax, the amount in box 2 will be LESS than the YTD wages on the paycheck. Boston--Pre-tax health care lowers your social security earnings. This *will* ultimately reduce the monthly payment one receives from SSA. It *may* also affect how pension payments are paid out. I happen to be a devout saver--anything I don't pay as taxes now, I save. My savings should be enough to compensate for any loss in benefits. The quick estimator at the SSA web site (plugging in $40,000 and 41,500 as the annual income with pre and post tax dollars) shows about a $30 difference in monthly benefits. At the 15% tax bracket, someone would pay $20/month more in tax now. If FERS uses the $40,000 number for retirement (assuming 20 years government service) , that would be another $25 a month as well.
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