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.
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.”
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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.