Q. Are medical insurance coverage rates deductible when filing a NJ-1040 return? The rates were being compensated by the worker. The quality is mentioned in Box 14 as Section 125 and incorporated in Box 16. I’m aiding a relative with a return.
— Supporting, I hope
A. It’s nice to you to assist your relative.
You surely want to get any deductions correct.
Healthcare bills, such as health-related insurance coverage premiums, are deductible on your federal tax return to the extent they exceed 7.5% of your adjusted gross profits, explained Bernie Kiely, a accredited monetary planner and certified general public accountant with Kiely Capital Management in Morristown.
New Jersey will allow you to deduct health care fees to the extent they exceed 2% of your earnings, he explained.
You talked about Box 14 and Box 16 “State Wages,” which refers to the W-2 form. You also referred to IRS Portion 125.
“IRS code Area 125 makes it possible for an employer to set up a premium only plan, where an employee’s insurance coverage premium contributions can be deducted from his or her payroll on a pre-tax foundation,” he stated. “This can conserve workforce up to 40% on income taxes and payroll taxes.”
The employer also will save on these taxes, he said.
“Since the health-related premiums were paid out for with pre-tax dollars, they are not deductible,” Kiely reported. “To do so would be double dipping.”
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Karin Cost Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Comply with NJMoneyHelp on Twitter @NJMoneyHelp. Come across NJMoneyHelp on Facebook. Indicator up for NJMoneyHelp.com’s weekly e-publication.