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Medical insuraance deductions



I was offered a job that would be a $12,000 pay raise.  Unfortunately, my medical insurance rate would be higher.  I would need to pay $7,951 a year.  This would affect my take home pay.  I would have a substantial pay raise but not receive it due to the medical insurance pay rate deduction.  When I'm doing my taxes would the medical deductions be considered?  Because I would see the pay raise like I eexpected.  I don't want to appear in another tax bracket but never received the money.  

3 Replies

Medical insuraance deductions

it may me that those premiums may be paid under an employer health plan and hence your w-2 taxable wages will be reduced by the premiums you pay. There are exceptions so the only way to know for sure is to ask your employer. 

Medical insuraance deductions

Thank you!

Medical insuraance deductions

There are not enough facts to understand your situation.


Are you getting employer-sponsored health insurance at your current job, or paying for Marketplace insurance with a subsidy?


Will you be getting employer-sponsored health insurance at your new job, or paying for Marketplace insurance?


It is true that, for some people who are buying Marketplace insurance, a small pay raise can disqualify them from the subsidy, meaning their insurance cost goes up more than the amount of the raise.  This is just the way the law was written.


If you are on an employer-sponsored plan and changing to a different employer-sponsored plan, you should know that premiums for employer-sponsored plans are almost always deducted from your paycheck pre-tax.  That means that the impact on your take-home pay is less than you think.  If your gross wages go up $12,000, but you have $7500 in pre-tax medical insurance premiums, that means your gross taxable wages (W-2 box 1) will only go up $4500, so you aren't taxed on the money deducted for premiums.  It also means that you can't take an itemized tax deduction for your insurance premiums since you already paid them with tax-free money so you can't take another deduction.


If you have insurance now, and the quality of the coverage will be the same but the cost is increasing by $7500, then you are being offered a real raise of $4500/year.  Remember your employers are paying most of the cost of the insurance one way or the other, and a single adult is going to cost more or less the same to insure no matter who the carrier is.  (And your employers are always negotiating for the best deal with the insurers.)  It works sort of like this.


  Stated wage Employee premium Take home Employer share of premium Total cost of insurance Your "real" compensation
Old employer $3000/month $100/month $2900/month $900/month $1000/month $3900/month
New employer $4000/month $725/month $3275/month $275/month $1000/month $4275/month



Remember, your "real" compensation also includes sick leave, vacation days, employer match to a 401k, and other employee benefits.  If, after figuring your "real" compensation, the raise isn't worth the other difficulties, ask for more or decline.




*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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