Sep 18
Health Insurance Tax Laws Now and How They Would Change
With President Bush’s State of the Union address came the announcement of a proposal to change the way health insurance plan expenses are taxed. But before you understand what would change, you need to know what the current rules are.
As it stands, tax laws on health insurance premiums vary depending on who provides you with that health insurance. Those who are covered by health insurance offered by their employer pay no taxes at all on that coverage no matter what.
For those who purchase their own insurance, however, it’s a different story. The self-employed currently can deduct their health insurance premiums but those who are employed by those who don’t offer health insurance must pay taxes on their premiums.
With this discrepancy, President Bush disagrees. His proposal? Give employed workers who buy their own health insurance the same tax breaks afforded to the self-employed. In order to pay for the new deduction, everyone who is insured, including those who have coverage through their employers, will pay taxes on coverage that goes over a specified amount. That amount is $7500 for individuals and $15,000 for family coverage annually.
Some people would pay more taxes and others would pay less, which means that some love the idea and others hate it. Let’s just wait and see if it passes the Democratic Congress’ approval.
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