Employer contributions to health plan are tax-free

Why does this make sense — Medical premiums are tax free but the employers contributions are taxed to us as ordinary income? And most of the time our deductibles are so high we don’t get any benefit from the coverage anyway?


Dear Stumped,

Employer contributions toward health insurance are not taxed to you as ordinary income.  Those are tax-free, as are the benefits that your plan pays for your care.

You are correct that you may not get any service paid for by your plan, depending upon your needs in any particular year.  On the bright side, you can be glad that you did not need much medical care.  The best way to get a lot of “payback” from your health insurance plan is to be very ill — seems like a tough way to get your money’s worth!

Linda Riddell

About Linda Riddell

A published author and health policy analyst with 25 years’ experience, Linda Riddell's goal is to alleviate the widespread ailment of not knowing what your health plan can do for you.