Innovative Strategies For Winning Tax Controversies, Business Structuring And Estate Planning

Bush Health Insurance Plan to Hike Taxes

by | Jan 25, 2007 | Uncategorized

How much of a tax break or hike would you see under the proposal?

Figure out the difference between the total cost of your healthcare plan and the federal cap on your health tax benefit ($7,500 for single coverage; $15,000 for family coverage). Then multiply that difference by the sum of your top tax rate plus 7.65 percent (which is the portion of payroll taxes you pay for Social Security and Medicare).

This will give you a ballpark idea of your tax savings or tax increase.

So if your plan costs $12,000, the difference between your expense and the $15,000 family deduction is $3,000. If you’re in the 25 percent tax bracket, you’d multiply $3,000 by 32.65% (25% + 7.65%), which would give you tax savings of about $980.

Conversely, if you pay $3,000 more than the deduction cap for insurance, you’d pay an extra $980 in income tax and payroll tax.