Federal Taxation of Health insurance

Question 1

With disability income insurance: Premiums are not tax deductible, but benefits are ___?

Answer 1

Benefits are tax free

Question 2

What does AGI stand for?

Answer 2

Adjusted gross income

Question 3

What can a medical expense insurance policy owner do, to qualify for a tax deduction?

Answer 3

they can add premiums to unreimbursed medical expenses

Question 4

For a medical expense insurance policy tax deduction, medical expenses must exceed what % of AGI to take the deduction?

Answer 4

must exceed 7.5%

Question 5

A LTC policy owner may add premiums to unreimbursed medical expenses to qualify for a tax deduction…Are the benefits taxed?

Answer 5

No with LTC tax deduction benefits are NOT taxed, within limits.

Question 6

With AD&D insurance-Principal and Capital sums are not taxed if paid in what?

Answer 6

Lump sums

Question 7

To do the math for 7.5% of AGI…what is 7.5% as a decimal on calculator?

Answer 7

0.075
AGIx0.075

Question 8

To receive tax-free benefits under a qualified LTC insurance policy, the insured must be diagnosed as what?

Answer 8

Chronically ill

Question 9

TRUE OR FALSE:
Medical insurance and qualified LTC insurance premiums are considered eligible medical expenses.

Answer 9

TRUE

Question 10

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.

Answer 10

FALSE- A business can deduct group health insurance premiums IT PAYS without limit.

Question 11

Is Group health insurance a deductible business expense?

Answer 11

yes

Question 12

Insured’s are not taxed on benefits from what 2 group plans?

Answer 12

Group managed care plans and AD&D.

Question 13

In group DI insurance policies, the percentage of the premium the employer pays, is what for the employee?

Answer 13

the percentage of benefits that is taxable income.

Question 14

How are Individual and Group LTC policies the same in regards to tax deductions?

Answer 14

If expenses exceed 7.5% of AGI they are deductible from taxable income.

Question 15

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.

Answer 15

Section 125 Cafeteria plans

Question 16

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.

Answer 16

TRUE

Question 17

A 125 Cafeteria plan can be set up in two ways..What are they?

Answer 17

1.Pre-tax health insurance premium deductions
2. unreimbursed medical expenses.

Question 18

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?

Answer 18

an unreimbursed medical expense

Question 19

Benefits from group medical insurance are NOT ___?

Answer 19

NOT taxable income

Question 20

DI insurance premium deductibility applies only to which kind of insurance?

Answer 20

BOE (business overhead expense) insurance

Question 21

Whether health insurance expenses are tax-deductible or not, it depends on if they are necessary or ___?

Answer 21

necessary or discretionary

Question 22

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.

Answer 22

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.

Question 23

AGI (adjusted gross income) deductions are associated with, “above the line” or “below the line” deductions?

Answer 23

AGI= BELOW THE LINE DEDUCTIONS

Question 24

Self employed person’s can deduct personal medical, LTC, and dental insurance premiums. Are these “above the line” or “below the line” deductions?

Answer 24

“above the line”

Question 25

Self-employed persons may deduct LTC insurance premiums up to maximum federal limits for the year. What are the max annual limits based on?

Answer 25

the policy owners age

Question 26

Premiums are tax-deductible =Benefits are ___?

Answer 26

taxable

Question 27

Premiums are not tax-deductible = Benefits are ___?

Answer 27

tax-free/not taxable

Question 28

Premiums for key person DI insurance are a discretionary business expense. What does this mean in regards to tax deductions and benefits?

Answer 28

Premiums are not deductible-benefits are tax free.

Question 29

If a business expense is discretionary are the premiums tax deductible?

Answer 29

NO

Question 30

Self-employed persons can deduct the cost of which 3 types of insurance?

Answer 30

Medical, dental, and LTC