In their quest to replace Obamacare, Republicans are making the first move toward limiting the value of employer-based health care benefits.
They reportedly will propose a cap of $12,000 for an individual plan and $30,000 for family coverage. Any coverage over those thresholds would be taxed at the individual’s tax rate.
Unlike the current “Cadillac Tax” which assesses a 40 percent excise tax on plans costing more than $10,200 for an individual and $27,500 for a family, this proposal is a tax on individuals.
Of course, the devil is in the details. Will the limits be indexed and to what measure?
In addition to the tax-free status of employer contributions, many workers are currently making their portion of premium payment on a pre-tax basis under Section 125 of the IRC. It would seem this a more practical first target for tax savings.
Government employees, especially state employees and union workers will be the hardest hit should the tax change occur because they typically have the most generous and costly health plans. However, while those may seem like high limits, it is not hard to find an employer plan that is already at or very close to those limits.
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The value of the plan is generally based on the premium or the premium equivalent for self-insured plans which all large employer are. Keep in mind the tax effective in 2018 is not a tax on individuals, but rather on the plan sponsor or insurance company. What’s on your w-2 is what could be used in the event there is an income tax on the value of employer contributions toward your coverage.
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Any ideal how the cost of health insurance that is list on the W-2 is figured? I assume that it is this figure that American will be taxed on starting in 2018. Last year my healthcare cost was about $13k per my W-2, this year it was almost $17k.
I currently work for your old employer and I have added together my insurance premium with & without the 80/20% split, what was actually billed to the insurance company, what they paid, and my drug costs, I just have not come up with the correct combination to come up with the figure yet.
Then I got my wife’s W-2. Her W-2 in box 12DD stated her healthcare was $4725. She was a part time worker, with no benefits, no vacation, no sick days, no work no pay, so how did she get over $4k for healthcare? Would she be liable for that amount even if she was not even offer healthcare?
I just would like to know how this is figured to ensure that I do not increase my tax liability.
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