Duncan Roberts

and private insurance premiums that aren't employer sponsored so don't come out of a paycheck pre-tax, which isn't the case of the OP.

Sally Redux

Yes, sorry, I added to it.

E3only

Ok, well my health insurance coverage is via my employer. Say I have to pay $250 as premium (this could be some discounted rate or employer could be contributing another $100 and paying the whole amount to Anthem – I do not know).

So from my understanding if my Gross Monthly were $6,000 then before taxes are calculated the $250 will be deducted i.e. I will get a cash benefit of $250*average tax
rate.

Now, if for the year I spend not only the $250 pm but say an additional 7,000 in co-pays or whatever and other medical costs NOT covered by insurance, this 7,000 – 7.5% AGI can be claimed back.

Hope I am on the right path.

Jscl

Premiums are not necessarily paid with pre-tax dollars. Your employer has to subscribe to a cafeteria plan for your premiums to be tax free, if they don't then they will come out of your already taxed income. Look for the words "Cafeteria plan" or "Section 125" in your company's benefits package to see whether your premiums will come from pre-tax or taxed income.

Sally Redux

Yes, in fact my husband's are not pre-tax. E3 should definitely check his situation.

Giantaxe

That's a good point... it's also going to get more complicated down the road as the value of employer-provided insurance over a (fairly high) threshold will become taxable as part of the health care reform passed earlier this year. Don't think that provision kicks in for quite a while though.

Duncan Roberts

No. It will just mean that your taxable income for the month would be $5750.

I guess there are some employer plans that are not pre-tax so they would be different. Don't know how they fit in.

Jscl

(sorry for second post in a row, responding to your latest post)

In order to get ANY benefit from itemised deductions your total itemised deductions must be higher than the standard deduction ($11,400 for a married couple filing jointly). In my experience usually the only people whose itemised deds are greater than their std deds are those who either have a high income and live in a state with state income tax (state taxes are deductible on your IRS return) or those with a mortgage who pay a lot of mortgage interest (also deductible).

If the sum of your itemisable(sp?) deductions are less than the standard you take the standard deduction, and you'll actually be better off, although it feels a bit like you're cheated out of something!

Also note IF your premiums are paid with taxed income rather than being part of a cafeteria plan then they also count towards your medical expenses and that 7.5% limit.

E3only

THanks guys. I am waiting for the health insurance package. I will update my findings.

aceastwood

I know you are mostly focused on health insurance, but be aware that dental insurance is usually exactly what insurance should NOT be. It will reimburse you for stuff that you can probably easily afford anyway (cleanings and checkups), but when you start needing more substantial treatment, it covers less and less and then leaves you to pay for everything above typically $1,000. And it is really easy to run up $1,000 of treatment.

E3only

I need a crowning done in 6 months. Gulp.

Jscl

Not sure I entirely agree with that... my dentist charges $55 for the check-up, $99 for cleaning, $130 for x-rays (all of which are covered 100% under insurance) so that's about $450 per person of coverage per year if you just have the regular stuff. I had an old filling replaced last year and it was $153 (which I only had to pay $37 of), so that was around $1000 of savings for myself and my husband. For that we pay premiums of $225 and therefore saved $775 that year, and a little less on non-filling years.... you'd want to work it out with your numbers though.

On a similar note though, vision insurance gives you very little benefit unless you have something more than just ordinary vision needs. Ours costs $140 a year, and we save about $50 on the check-up and about $150 for glasses (only available every other year with our plan). With the two of us we save on average just $110 per year if we both get check-ups.

Jscl

And since I have my dental bills out right now... my last crown was billed at $916, but that was in 2008. Of that I had to pay 50% of the "negotiated price" (which is what your insurance say the dentist can charge them, but if you didn't have insurance you'd pay the full amount) plus the deductible (you don't have to pay that with maintenance and prevention appts) which ended up being $540. I'd get that dental insurance.

aceastwood

I count this as minor stuff. Start costing out crowns, root canals, bridges and, gulp, implants. One root canal and crown can cost $1,500+ and your insurance paying probably half of that. Implants can run into five figures if you need a few and you'll get back one thousand at most.

My point is not that you can't save money on dental insurance, but that when you most need it - when you have significant expenses - it doesn't cover you. Imagine buying house insurance that covers you if break a window but not if the house burns down. That is what dental "insurance" is like.

Giantaxe

It really depends on how much you are paying for the insurance, what the yearly limit (if any) is on reimbursements, and how many people are being covered. What I've found over the years is that when multiple people are being covered, it's pretty much a no-brainer to get the insurance: as you illustrated, just the regular checkup visits are likely to make it worthwhile. With just one person covered, it's been a lot more marginal. Also remember that if you don't get insurance, you can still pay your costs out of a health care reimbursement account and use pre-tax dollars. However, with that approach you do have to have a good idea of what costs you will be incurring in a particular year given the "use it or lose it" nature of those accounts.