Author Topic: Working spouse contribution – paid with pretax dollars but is it taxable?  (Read 273 times)

goldenmustache2

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I use my employer’s health insurance to cover my wife, which leads to a $50 per paycheck “Working spouse contribution” that’s automatically paid by my employer with pretax dollars.  Is this actually a tax-deductible cost?  Does something like that even exist?  I know with my 401k and HSA that those are tax-deductible items that reduce my year-end taxable gross income.  But do things like health insurance contributions reduce that as well?  Or is my employer using pretax dollars but I have to pay taxes on that income year-end anyways?

viner

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Your employer is using pre-tax dollars and you will not have to pay taxes on those at year end.  This is common practice and has been a part of the Internal Revenue Code for some time.  Another benefit to employer provided benefits.

goldenmustache2

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Your employer is using pre-tax dollars and you will not have to pay taxes on those at year end.  This is common practice and has been a part of the Internal Revenue Code for some time.  Another benefit to employer provided benefits.

Thanks - do you know what tax code that's documented under?  I'd like to learn more as both my spouse contribution and regular health care payments will be going up next year.  Are the exemptions unlimited - anything towards employee health coverage doesn't get taxed?  Regardless of other income status?

viner

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 I believe it is covered under section 125 of the Internal Revenue Code.  I don't believe there are any restrictions based either on the amount of the insurance premium you are paying or your adjusted gross income from your employer or any other source.  Whoever handles human resource issues at your employer should be able to easily confirm ( or correct) what I've outlined.

MDM

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Or is my employer using pretax dollars but I have to pay taxes on that income year-end anyways?
By definition, pre-tax dollars are not taxed.

Most paystubs contain year-to-date entries for all items.  In particular, your year-to-date gross minus all your year-to-date pretax items should equal your year-to-date "W-2 gross."  Does it?

goldenmustache2

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Most paystubs contain year-to-date entries for all items.  In particular, your year-to-date gross minus all your year-to-date pretax items should equal your year-to-date "W-2 gross."  Does it?

Taxable gross + total deductions add up pretty close to total gross, to within ~$300.  That remainder is due to tax-compensations for small company rewards given out. 

I've been trying to get more accurate with my tax calculations, so confirming this helps.

MamaJ

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I just struggled with this.  Last year, I went on my h's insurance plan (better coverage) and paid the $50/paycheck working spouse fee.  This year, I studied the numbers more closely.  By going back on my own insurance, I would save $922 / year.  As long as I don't get too severely sick.
 
+$50 x 26 = $1300 (save on working spouse contribution fee)
-$33.75 x 26 = -$877.50 (cost per pay period to stay on my insurance)
+$500 HSA contribution by my company
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$922.50

I would go on my husband's insurance if my own company paid something close to $1300 for declining medical coverage but they don't.  So, they will pay out over $4,500 for my medical cost plus $500 into my HSA.