Health Insurance Tax Credit I work as a nanny and needed health insurance desperately. Lucky for me, Tom Breedlove of Breedlove & Associates answered my questions, and my employer's questions, without a consultation fee!
First, I went to the Heatlh Reform In Action web site to find the most affordable individual health insurance available in my state. Then, Tom Breedlove explained that if my employer sends in the health insurance premiums that cost is not taxable income.
He explained it is more beneficial to have my employer send in the premiums to lower my taxable income than to add the health insurance premiums to my end of the year medical expense deductions.
But, my employer and I were completely unaware that my employer will actually benefit with tax credits for sending in my health insurance premiums!
Mr. Breedlove explained to us that small employers (less than 25 employees) who contribute to their employee’s health insurance policy are entitled to a tax credit on that expense. So, in addition to being a non-taxable form of compensation, health insurance contributions made by a nanny employer have the added benefit of savings from tax credits!
Here are some benefits parents can offer to their employee and have them be considered non-taxable compensation (no taxes for employer or employee). The IRS-approved benefits for households are:
1. Health Insurance premiums from a state-licensed insurance provider
2. Up to $5,250 per year towards tuition and books for an accredited college or university
3.Up to $230 per month toward public transportation to and from the worksite
4. Up to $230 per month towards parking (at the jobsite and/or at the public transportation facility)
We hope your found Tom Breedlove's advice for common nanny tax dilemmas helpful this week. Be sure to scroll back to read his other articles if you missed any this week.
Tom Breedlove is a Partner at Breedlove & Associates, the nation's leading specialist in payroll, tax, and HR services for household employers.
11 comments:
OMG this is timely for me! I had no idea about the health reform website starting a new job next week and boss asked me to research plans! Very, very helpful.
Up to $230 per month toward public transportation to and from the worksite
I had no idea and I've been paying $70 per month for bus for years!
Really gr8 article very helpful. My employer pays half and I pay half. So now if he gets the tax credit of $900 he won't be adding much at all to his half but I'll be paying still. Shouldn't he reward me with that tax credit or at least split the $900 with me?
I think these things are all great.
However- if any of the above are part of your salary and not a perk-
A nanny needs to know what their taxable income is. Because you will only get 65% of the ON the Books taxable income if you ever need to collect unemployement, disabilty. Also only part of your taxable income will go to SS also.
In addition, if you need to apply for a loan- isn't only your taxable income considered?
Can someone please verfiy this...
Thank you.
So beware!
To nanny employers that earn a large income- these nanny perks equaling tax credits can come in very handy for a wealth family, and greatly reduce the amount of taxes they owe.
The info about the health insurance being untaxable income and to claim it BEFORE you are taxed, rather than deducting it at tax season is SO IMPORTANT!
Until this year I just used my medical expenses (including health insurance premiums) as a deduction. Very clearly we need to have our employers send in the premuiums so it is non-taxable income!
Anonymous: I don't understand are you saying we shouldn't pay taxes because all we will get is 65% of the money we paid in taxes? 65% is huge compared to having none IMO. It protects me I feel.
Tobagonanny, anonymous is saying that as you decrease your taxable income you may lower some benefits like unemployment or disability if you need them. I guess if you make only $18K you would really want to have non-taxable compensation. But if you earn enough for a higher tax bracket like $60K you would benefit from non-taxable income.
That's what anonymous meant.
Does anyone have to pay their own health insurance premiums but have their boss send in the payments for this tax credit?
Should your boss give you that credit $ when they get it for you to use for your insurance costs if you are paying your own health insurance??
I think the need to lower your taxes and having health insurance is WAY more important than worrying about getting laid off. Yes by paying taxes we need are protected if we get laid off with unemployment. But, most likely we won't need it. Health insurance we all need at some time. Taking $2.500 off my taxable income is great.
I was l0oking for some info on health insurance and fortunately find this blog post. The hard work that the author has done for writing this blog post is visible keep adding such valuable content for our future use also.
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