Does my Health Insurance have Tax Benefits: There are various proposals put forward to the government for the new or expanded tax benefits for health insurance.
The individuals who contribute to the current approved health savings account (HSA) would be allowed to remove the cost of health insurance which they have.
The government has even proposed refundable tax credit for helping low income families to purchase insurance. Promoters of these and other measures argue that new tax benefits are required to reduce the number of uninsured people and address equity and efficiency problems whereas their foes claim that they would benefit higher income tax payers.
As well some of them believe in extending government programs like Medicaid.
The present law contains a major tax benefits for the health insurance. The most important being employment based plans. The health insurance paid by the employers exclude from employees gross income. Two-third of non-institutionalized population below the age of 65 years is insured through this plan and on an average huge employer pays around 80% of their cost.
This exclusion also applies to the health insurance given by cafeteria plan. The self-employed tax payers may deduct 100% of their insurance though they don't itemize deductions. Few workers who are eligible for receiving pensions paid by Pension Benefit Guarantee Corporation can obtain refundable tax credit. The coverage under Medicare and Medicaid are not taxable incomes. Along with some exceptions, private and public insurance benefits are also not taxable.
Therefore, by lowering after tax cost of insurance, tax benefits facilitate in extending coverage to many people. The exclusions for employer-paid insurances benefit almost all workers as well are easy to administer. Employment based insurance has both advantage as well as disadvantage for a worker. Tax benefits increase demand for the health care as they provide services for discounted prices. This is the reason for the health care prices rising rapidly than inflation. |
