Federal Taxation of Health insurance Flashcards
With disability income insurance: Premiums are not tax deductible, but benefits are ___?
Benefits are tax free
What does AGI stand for?
Adjusted gross income
What can a medical expense insurance policy owner do, to qualify for a tax deduction?
they can add premiums to unreimbursed medical expenses
For a medical expense insurance policy tax deduction, medical expenses must exceed what % of AGI to take the deduction?
must exceed 7.5%
A LTC policy owner may add premiums to unreimbursed medical expenses to qualify for a tax deduction…Are the benefits taxed?
No with LTC tax deduction benefits are NOT taxed, within limits.
With AD&D insurance-Principal and Capital sums are not taxed if paid in what?
Lump sums
To do the math for 7.5% of AGI…what is 7.5% as a decimal on calculator?
0.075
AGIx0.075
To receive tax-free benefits under a qualified LTC insurance policy, the insured must be diagnosed as what?
Chronically ill
TRUE OR FALSE:
Medical insurance and qualified LTC insurance premiums are considered eligible medical expenses.
TRUE
TRUE OR FALSE:
Businesses may deduct group health insurance premiums, but only to the extent they exceed 10 percent of the business’s net income.
FALSE- A business can deduct group health insurance premiums IT PAYS without limit.
Is Group health insurance a deductible business expense?
yes
Insured’s are not taxed on benefits from what 2 group plans?
Group managed care plans and AD&D.
In group DI insurance policies, the percentage of the premium the employer pays, is what for the employee?
the percentage of benefits that is taxable income.
How are Individual and Group LTC policies the same in regards to tax deductions?
If expenses exceed 7.5% of AGI they are deductible from taxable income.
What is the name of the plan that allows employees to choose their benefits, and also withhold’s a portion of their income on a PRE-TAX basis to fund the benefits.
Section 125 Cafeteria plans
TRUE OR FALSE:
Section 125 Cafeteria plans provide a way for employee’s to pay for their share of group health insurance plan on a tax-free basis.
TRUE
A 125 Cafeteria plan can be set up in two ways..What are they?
1.Pre-tax health insurance premium deductions
2. unreimbursed medical expenses.
An employee who pays for all or part of the premium for Group medical insurance, may treat it as what, in order to qualify for a tax deduction?
an unreimbursed medical expense
Benefits from group medical insurance are NOT ___?
NOT taxable income
DI insurance premium deductibility applies only to which kind of insurance?
BOE (business overhead expense) insurance
Whether health insurance expenses are tax-deductible or not, it depends on if they are necessary or ___?
necessary or discretionary
Why are premiums for a business overhead expense DI policy a tax-deductible business expense, but premiums for disability buy-sell insurance and key employee disability insurance not tax-deductible.
BOE insurance keeps a business in operation if the owner becomes disabled, so it is a NECESSARY business expense.
key employee and buy-sell insurance are discretionary business expenses.
AGI (adjusted gross income) deductions are associated with, “above the line” or “below the line” deductions?
AGI= BELOW THE LINE DEDUCTIONS
Self employed person’s can deduct personal medical, LTC, and dental insurance premiums. Are these “above the line” or “below the line” deductions?
“above the line”
Self-employed persons may deduct LTC insurance premiums up to maximum federal limits for the year. What are the max annual limits based on?
the policy owners age
Premiums are tax-deductible =Benefits are ___?
taxable
Premiums are not tax-deductible = Benefits are ___?
tax-free/not taxable
Premiums for key person DI insurance are a discretionary business expense. What does this mean in regards to tax deductions and benefits?
Premiums are not deductible-benefits are tax free.
If a business expense is discretionary are the premiums tax deductible?
NO
Self-employed persons can deduct the cost of which 3 types of insurance?
Medical, dental, and LTC
