“Tax Free” Insurance Premiums

A couple of days ago I was interviewed for a piece on KUTV news about “Tax Free” Insurance Premiums. Under IRS Code Section 125, individuals are allowed to use “tax free” dollars to pay for individually owned, qualified insurance policies for you, your spouse, and any tax dependents which are NOT sponsored by an employer. Not all policies are qualified. Well the plan I am currently on is the Utah State HIP insurance program. However, the State of Utah has passed a law that states individuals on HIP may NOT pay for their insurance premiums tax free. The story on KUTV calls this law “mean” and they are pretty much right since I pay a little over $500 per month out of my own pocket but cannot claim the tax free status like most individuals do. Example: an individual earning $30,000 per year and paying $200 per month out of pocket for an individual health insurance policy stands to increase their net take home pay by $600 per year if they participate in a Premium Reimbursement Program.

POSTED BY: DAVID