What’s the biggest federal tax subsidy?
Most people would guess something other than the tax exclusion for employer
provided health insurance!
“Employers’ payments covering premiums for
employer-sponsored health insurance are exempt from federal income and payroll
taxes. Any portion of premiums paid by the employee is typically excluded from
taxable income and is therefore also tax-free, although some employers require
employees to pay their share of premiums out of after-tax income.” Who benefits
the most? “Because the exclusion of premiums for employer-sponsored
insurance reduces taxable income, it is worth more to taxpayers in higher
income tax brackets than to those in lower brackets.” So the more you earn, the more you benefit
from this subsidy. Learn more at the Tax Policy Center website: http://www.taxpolicycenter.org/briefing-book/key-elements/health-insurance/exclusion.cfm
Effective January 1, 2013, employers
are required to report the value of each employee’s health insurance premiums on their W-2.
The reportable cost includes both
the employer and the employee portions of the total premium. This information will not affect your taxes for 2013; the
amount will just be printed on your W-2.
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