Group Health Insurance - Tax Treatment

Question 1

Group Health Premiums - Employer

Answer 1

• An employer’s premium contributions to group health plans is tax deductible, as long as the contributions represent an “ordinary & necessary business expense.

Question 2

Group Health Premiums -

Individual

Answer 2

• Employer contributions for their employees are not taxable income.
• Generally, individual premium contributions to a group health plan are NOT tax deductible.
• Exception – as of 2019, if the contributions exceed 10% of an individual’s adjusted gross income, the amount is deductible.
• However, an individual can’t use this exception to claim tax deduction for his/her group disability or group AD & D premium contributions.

Question 3

Taxation of Group Health Benefits -

Medical Expense Plans

Answer 3

Benefits are not taxable because they cover an individual’s losses.

Question 4

Taxation of Group Health Benefits -

Disability Benefit Payments

Answer 4

• The employee-contributed, benefit payments not taxable; but,
• The employer-contributed, benefit payments to the employee are taxable