Q. Are medical insurance policies premiums deductible when filing a NJ-1040 return? The premiums had been paid out by the employee. The top quality is stated in Box 14 as Area 125 and incorporated in Box 16. I’m assisting a relative with a return.
— Serving to, I hope
A. It is awesome to you to aid your relative.
You undoubtedly want to get any deductions correct.
Professional medical bills, together with medical insurance policies rates, are deductible on your federal tax return to the extent they exceed 7.5% of your modified gross revenue, mentioned Bernie Kiely, a accredited monetary planner and licensed community accountant with Kiely Cash Management in Morristown.
New Jersey will allow you to deduct healthcare fees to the extent they exceed 2% of your cash flow, he mentioned.
You described Box 14 and Box 16 “State Wages,” which refers to the W-2 variety. You also referred to IRS Portion 125.
“IRS code Area 125 lets an employer to established up a high quality only strategy, in which an employee’s insurance policies quality contributions can be deducted from his or her payroll on a pre-tax foundation,” he stated. “This can help save workforce up to 40% on income taxes and payroll taxes.”
The employer also will save on these taxes, he mentioned.
“Since the health-related rates have been paid out for with pre-tax dollars, they are not deductible,” Kiely stated. “To do so would be double dipping.”
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Karin Selling price Mueller writes the Bamboozled column for NJ Progress Media and is the founder of NJMoneyHelp.com. Adhere to NJMoneyHelp on Twitter @NJMoneyHelp. Discover NJMoneyHelp on Facebook. Indication up for NJMoneyHelp.com’s weekly e-publication.