Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays.
My wife recently received a mass e-mail from an acquaintance warning of a supposed healthcare-related tax hike. The e-mail referenced H.R. 3590 and stated that, starting in 2011, your employer will be required to report the total value of your employer-provided health insurance plan on your W-2 form.
This much is true, but… It then went on to warn that this amount will be added to your gross income, and that you’ll be required to pay taxes on it. Sounds scary, but guess what? It’s not true. While I typically just skip over such things, a reader subsequently forwarded a similar message to me, so I decided to tackle it head on.
Will you have to pay taxes on your health benefits?
One of the sources cited for this information was a recent article in Kiplinger’s by Joan Pryde. They specifically pointed to #3 in her list of 13 ways that healthcare reform will affect your taxes, which states:
3. A requirement that businesses include the value of the health care benefits they provide to employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered taxable income.
So yes, this information is being added to your W-2 form, but it’s not going to be added to your gross income. Rather, the reason that it’s being put there is so the IRS can compare it to the so-called “Cadillac” healthcare thresholds.
So… What’s the deal?
I’ve covered this before, but…
Starting in 2016 (five years after the W-2 reporting goes into effect), you’ll be subject to additional tax if your total health insurance premiums are more than $10,200/year for employee-only coverage, or more than $27,500 per year for a family plan.
More specifically, this provision levies a 40% non-deductible excise tax on healthcare benefits in excess of these thresholds, though there are a number of exceptions. Interestingly, in a rare stroke of foresight, Congress actually indexed these thresholds to inflation (at an annual rate of the CPI + 1%).
Oh, and just in case you needed a reminder… You can’t believe everything that happens to show up in your inbox. 😉
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math (693)
- Dish Network Customer Service SUCKS (537)
- $8,000 Homebuyer Tax Credit (429)
- Pay Off Mortgage Early or Invest? (424)
- How to Claim the First-Time Homebuyer Tax Credit (352)
- Termite Control: Sentricon vs. Termidor (330)
- How Much Should You Pay a Babysitter? (292)
- Ethanol Blended Gas = Lower Mileage? (273)
- Reduced Credit Limits? Share Your Experience (256)
- $15,000 Homebuyer Tax Credit (242)
- Buying Furniture off the Back of a Truck (237)
- Will Mac OS X Lion Kill Quicken 2007? (191)