Discussion:Health Insurance Taxable to Employee?
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Discussion Forum Index --> Basic Tax Questions --> Health Insurance Taxable to Employee?
Discussion Forum Index --> Tax Questions --> Health Insurance Taxable to Employee?
| 14 January 2008 | |
| Is health insurance ever taxable to an employee? (With the exception of them being a 2% shareholder.) Here is my scenario. The company pays 50% of all employees health insurance, except one employee. That one employee has 100% of his health insurance paid by the company. The employee is not a shareholder. Is the additional 50% paid for this employee taxable to him? I cannot find any research online to help me with scenario. Everything I read says health insurance benefits are not taxable to the employee. Any help would greatly appreciated. | |
| 14 January 2008 | |
| "Under Section 106(a) and Reg. Section 1.162-10(a), premiums for accident or health insurance coverage paid by an employer for the benefit of employees and their dependents is deductible by the employer and excluded from employee gross income." 2007 Small Business Quickfinder page K-9.
You may want to look at the nondiscrimination rules for employee benefits - small business quickfinder page K-3. "A plan will favor key employees if more than 25% of the total nontaxed benefits for all employees go to key employees." This would cause the benefits to be taxable to the highly compensated or key employee. | |
| 14 January 2008 | |
| Although, Sec. 105 uninsured plans must adhere to the nondiscrimination rules, Sec. 106 plans may discriminate without causing loss of benefits. The original post described a type of Sec. 106 plan. | |
| January 15, 2008 | |
| Good catch, Riley.
While these benefits are exempt from taxable wages, I often wonder if plans like these would be subject to FICA under Sec 3121(a)(2). I see some employers offer full coverage of health insurance to some employees while they make other employees pay for their spouse and dependents. Has the employer actually split the employees up into two "classes"? Or is the employer just offering more benefits to specific employees as part of the negotiation process? | |
| 17 January 2008 | |
| The employer and employee agreed to the insurance arrangement as part of the hiring negotiations. | |
