Q. Are health care coverage rates deductible when filing a NJ-1040 return? The premiums had been compensated by the employee. The high quality is mentioned in Box 14 as Section 125 and bundled in Box 16. I’m encouraging a relative with a return.
— Aiding, I hope
A. It is good to you to help your relative.
You surely want to get any deductions appropriate.
Clinical fees, such as professional medical coverage rates, are deductible on your federal tax return to the extent they exceed 7.5% of your altered gross profits, stated Bernie Kiely, a accredited economic planner and accredited community accountant with Kiely Cash Administration in Morristown.
New Jersey makes it possible for you to deduct healthcare expenses to the extent they exceed 2% of your profits, he explained.
You mentioned Box 14 and Box 16 “State Wages,” which refers to the W-2 sort. You also referred to IRS Portion 125.
“IRS code Area 125 permits an employer to established up a high quality only approach, wherever an employee’s insurance coverage quality contributions can be deducted from his or her payroll on a pre-tax foundation,” he stated. “This can save employees up to 40% on income taxes and payroll taxes.”
The employer also will save on these taxes, he reported.
“Since the health care premiums were being paid for with pre-tax bucks, they are not deductible,” Kiely mentioned. “To do so would be double dipping.”
Email your concerns to [email protected].
Karin Value Mueller writes the Bamboozled column for NJ Progress Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Come across NJMoneyHelp on Facebook. Indicator up for NJMoneyHelp.com’s weekly e-publication.
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