Are Health Insurance Deductions from Payroll pre-tax or post-tax?

Question

I've recently realized that my company was deducting too much from my check towards my health insurance. So now they have to reimburse me. Should my reimbursement check be tax-free since the amount deducted was from post-taxed income?

Answer 1

Unfortunately, the honest answer is: It varies.

Insurance deductions are not, by default, tax-free.  If your company has a good broker, they will be, because you will have a Section 125.  Likewise, whether your reimbursement will be taxed or not, will depend on how they process it.  If your company's HR department is well organized, on the ball, AND cares about  you, it should come back exempt from tax.

Answer 2

No health insurance is deducted before taxes are withheld.  So what you receive back will be taxed.

Answer 3

Health insurance deductions don't have to be deducted pre-tax, but if your company has a Section 125 plan in place, they usually are.  I know where I work, deductions are automatically taken pre-tax unless an employee specifies otherwise in writing, or there is a domestic partner covered.

Therefore, if the deductions came out of your paycheck on a pre-tax basis, your reimbursement will be taxed.

If the deductions came out on a post-tax basis, then your reimbursement would NOT be taxes as you have already had taxes withheld, and would not have to have any withheld again.

Hope that makes sense.

Answer 4

Insurance premium deductions are generally pre-tax.

One exception is domestic partner benefits, which are post-tax due to IRS regulations.

Answer 5

Yes.  You won't have to pay taxes twice.