Wisconsin Health insurance premium deduction

[mvanengen]

My son works for an employer the provides health insurance.  He has an amount deducted for his portion of the premium from his bi-weekly check.  Is this premium deductible on Wisconsin return?   For myself my wife and I are on social security so there is the monthly medicare deduction.  My wife and I also pay a monthly premium for a medicare supplement.  Same question, are these premiums deductible?  Neither my, or my son's medical costs were not large enough to be deducted on fed return.  Hope this question makes sense. 

[DavidD66]

For your son, probably not.  According to the Wisconsin Department of Revenue:

 If the amounts were paid with after tax contributions, you may use these amounts for the subtraction. Amounts taken out pre-tax from your wages to pay health insurance premiums do not qualify for the subtraction. Some examples of amounts not eligible for the subtraction are:

• Your share of the premium is paid by making a pre-tax reduction in your salary through payroll deductions.
• Your medical care insurance premiums are paid through your employer's fringe benefit cafeteria plan or flexible spending account (may be identified as Internal Revenue Code sec. 125 or as a pre-tax deduction on your Form W-2).
• Amounts identified as Code DD in Box 12 of your Form W-2. This is insurance that was provided by your employer and cannot be claimed for the Wisconsin subtraction for medical care insurance.

For your Medicare premiums and Medicare supplements, as long as you pat the premium costs of the Medicare and supplemental insurance they are eligible for a full subtraction from Wisconsin taxable income.

[mvanengen]

thanx for the reply.  I saw this definition as well and am still confused.  My son is basically paying out of pocket but having it deducted, but it is not reducing his income, really no different than sending in a check every month.  I'm not sure why this is different than my case where I pay to the ins company directly?  I'm not disagreeing with you, I'm just trying to understand the difference.

Thanx for the quick reply.

Mark

[BillM223]

On your son's W-2, does he have a code DD in box 12 with a number? If so, this is the sum of what he and his employer paid towards his health insurance premiums. By definition, this amount is pre-tax, that is, it is removed from Wages in boxes 1, 3, and 5 before the W-2 is printed. This is why it is different from your son just writing a check.

This is what David is referring to. He also noted that the pre-tax premiums might be reported in box 14 as a Section 125 benefit.

This means that the only way you can tell if the code DD amount is actually removed from Wages is asking his employer - there is no way on the W-2 to tell; however, if they used code DD and did not removed the amount from Wages, then they filled out the W-2 wrong, according to the IRS W-2 instructions. Note that these are instructions for the employer on how to fill out the W-2, not instructions for the taxpayer who receives it.

As David notes, pre-tax amounts are not deductible in Wisconsin, but only after-tax amounts.

[mvanengen]

Thanx for the very quick reply.  There is a large amount on line 12DD.  So I am trying to get the definitions straight.  Saying this is pre-tax, does that mean his income is being reduced by this amount like contributing to a 401K.  (I was self-employed for 40 years so never dealt with this situation) 

[BillM223 · Accepted solution]

Yes, his employer removed the code DD amount (as well as some other amounts in box 12) from Wages in boxes, 1, 3, and 5 before the W-2 was printed. This means that your son does not pay federal income tax, Social Security tax, nor Medicare tax on the code DD amount.

You can see a somewhat similar situation when an employee contributions to a 401(k) plan. This amount appears in box 12 on the W-2 with a code of "D"; however, this amount is removed only from Box 1, not from 3 or 5, so it is easier to see. 

The code DD amount is "pre-tax" because it was never in your son's taxable income.

And, yes, the self-employed picture is quite different.

[shart2427]

Thanks,

We're retired and this was a big help as I haven't seen this particular deduction and you saved me some searching.