Federal Tax Considerations for Accident and Health Insurance

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income?

7.5% - Most people who itemize their deductions can claim deductions for unreimbursed medical expenses, those that are not covered by health insurance, that exceed 7.% of their adjusted gross income.

Under which condition would an employee's group medical benefits be exempt from income taxes?

An employee's group medical benefits are generally exempt from taxation as income. Group medical and dental benefits are received tax-free to employees. Also, premiums paid by the employer are deductible as business expenses.

Which of the following statements is correct concerning taxation of long-term care insurance?

Excessive benefits may be taxable. Regardless of whether or not the insured can deduct individual long-term care premiums, the benefits are received income tax free by the individual. Excessive benefits as determined by statute are taxable as ordinary income.

How do employer contributions to a Health Savings Account affect the insured's taxes?

The employer contributions are not included in the individual insured's taxable income. HSA contributions made by an employer are not included in the determination of an individuals taxable income.

An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation?

They are tax deductible. An individual covered by a high deductible health plan can make a tax-deductible contribution to an HSA and use it to pay for out-of-pocket medical expenses.

How are employer contributions to Health and Reimbursement accounts treated in regards to taxation?

They are tax deductible. Employer's contributions to HRAs are tax deductible.

In medical expense insurance polices,

unreimbursed medical expenses paid for the insured, the insured's spouse and dependents may be claimed as deductions if the expense exceed a certain percentage of the insured's adjusted gross income. The law permits deductions for reimbursed expenses in excess of 7.5% of the adjusted gross income.

Group disability income insurance premiums paid by the employer are

Deductible by the employer as an ordinary business expense.

Group disability insurance premiums paid by the employer are

Deductible by the employer as an ordinary business expense. Group disability income premium paid by the employer is considered tax deductible by the business as an ordinary business expense. The premium payments are neither taxable nor tax deductible to the employee.

Which type of insurance provides funds for a business organization to purchase the business interest of a disabled partner?

Disability Buy-Sell Insurance provides funds for business organizations to purchase the business interest of a disabled partner. The premiums are not deductible, but the benefits are received income tax-free.

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer?

Disability income.

Know this!

Disability insurance premiums are deductible as buisness expense; benefits are taxable income for employee.

The benefits received by the business in a disability buy-sell policy are

Income tax free.

The benefits received by the business in a Disability Buy-Sell policy are

Income tax free. In disability buy-sell policies, whether cross purchase or entity, the benefits are received income tax free by the business, but the premiums are not deductible to the business.

The benefits received by the business in a disability Buy-Sell policy are

Income tax free. In disability buy-sell policies, whether cross purchase or entity, the benefits are received income tax free by the business, but the premiums are not deductible to the business.

Key Person disability income policy

Key person disability benefits are not considered taxable income to the business.

Under a Key Person disability income policy, premium payments are

Made by the business and are not tax-deductible.

Premium payments for personally-owned disability income policies are

Not tax deductible. Premiums for personally-owned individual disability income policies are not deductible.

Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are

Tax deductible. Contributions to HSAs by individuals are deductible, even if the taxpayer does not itemize. Contributions by an employer are not included in the individual's taxable income.

Under what condition are group disability income benefits received by an employee NOT taxable as income?

When the benefits received are equal or less than the employee's percentage of the contribution.

When may an insured deduct unreimbursed medical expenses paid under a long-term care policy?

When the expenses exceed a certain percentage of the insured's adjusted gross income.

Flexible Spending Account

is a form of cafeteria plan benefit funded by salary reduction. The employees are allowed to deposit a certain amount of their paycheck into an account before paying income taxes. FSA benefits are subject to annual maximum and "use-or-lose" rule.