One Word: Relax.
When you receive your W-2 in January, you’re going to notice that there’s some new information displayed there. It’s going to be in Box 12 with the code “DD” and the amount shown would be the cost of your health insurance coverage.
This was the subject of some heart palpitations two years ago with the Affordable Care Act was passed by Congress. Some less-than-trustworthy news sources declared that health care insurance was now going be considered taxable income by the government and that workers would have to pay taxes on “income” that they never actually received.
Scoundrels!
One Word: Relax.
Your health care benefits are not taxable income and the cost of your insurance is on the W-2 for informational purposes only. For whose information, you may be asking? Well….yours.
If I owned a crystal ball, I could tell you with some certainly how this whole health insurance issue is going to pan out in the future. But I don’t, so I can’t. But if I were a betting man, I would bet that many of us who had previously been covered under an employer-provided plan will probably be shopping for insurance on our own at some point in the future.
Is that a good thing? A bad thing? I don’t know, other than to say that it’s a Big Thing.
Purchasing insurance on the open market requires a certain amount of background information, and not least of that information is how much your current insurance costs, so you can decide if the insurance you’re buying is a decent value. Most employees, however, only know how much their insurance costs them, and have no idea how much is being paid by their employer.
This change to the W-2 will give employees that information. All you have as to do is look at the amount in Box 12 labeled “DD” and you know the street value of your insurance coverage. Of course, the cost of premiums alone isn’t the whole story when it comes to purchasing insurance (let’s not forget deductibles and co-payments), but it’s a good place to start.
Remember that not all employees will see this figure on their W-2, and it’s not just because their employer doesn’t provide health insurance. Many employers (particularly small businesses) are exempt from providing this information because it was considered to much of an administrative burden. However, you can always consult with your Human Resources contacts at work to determine the total cost of your insurance.
Is your health insurance going to be taxed? No. Really.
Relax.
As always, if you have any specific questions, you can find me at jeffrey.ritchie@yahoo.com or follow me on Twitter at http://twitter.com/#!/MilwaukeeTaxPro
