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Are health insurance premiums deductible on tax returns?

by Danseal | Mar 29, 2022

Q. Are health care insurance coverage rates deductible when filing a NJ-1040 return? The premiums had been paid out by the employee. The top quality is listed in Box 14 as Portion 125 and incorporated in Box 16. I’m helping a relative with a return.

— Helping, I hope

A. It is awesome to you to help your relative.

You surely want to get any deductions appropriate.

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Clinical bills, which include professional medical insurance coverage premiums, are deductible on your federal tax return to the extent they exceed 7.5% of your modified gross revenue, stated Bernie Kiely, a certified financial planner and certified public accountant with Kiely Money Management in Morristown.

New Jersey lets you to deduct professional medical costs to the extent they exceed 2% of your earnings, he claimed.

You mentioned Box 14 and Box 16 “State Wages,” which refers to the W-2 form. You also referred to IRS Part 125.

“IRS code Segment 125 enables an employer to established up a quality only approach, wherever an employee’s insurance plan top quality contributions can be deducted from his or her payroll on a pre-tax foundation,” he explained. “This can conserve workforce up to 40% on earnings taxes and payroll taxes.”

The employer also saves on these taxes, he stated.

“Since the health-related rates have been paid for with pre-tax pounds, they are not deductible,” Kiely reported. “To do so would be double dipping.”

E-mail your concerns to [email protected].

Karin Selling price Mueller writes the Bamboozled column for NJ Progress Media and is the founder of NJMoneyHelp.com. Observe NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Fb. Sign up for NJMoneyHelp.com’s weekly e-publication.

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