Friday, May 6, 2011

Should you have your health insurance premiums deducted before taxes?

If you do, will it make you have to pay more in taxes at the end of the year?
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If you elect to have your share of health care premiums paid pretax, your withholding will be tweaked to adjust for this automatically. The difference is instead of making $20,000 at the end of the year, your W-2 will say you made $18,500. This is less income, less tax and generally a good thing. (It does reduce your income for social security purposes, but I haven't seen any persuasive logic that paying for health care post tax now will give you enough extra money in retirement to justify not doing it.)
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