Health insurance deduction and subsidy for same amount on same check.

[Jo_Andy]

My employer deducts my health insurance from my paycheck.  He also adds it back in and calls it employer subsidy.  My health insurance is a completely covered benefit.  Does that make the subsidy taxable?

[HelenC12]

Generally, the portion of health insurance you pay is pretax and the portion your employer pays is not taxable. Please ask your employer if the "subsidy" is taxable. When you say, "He also adds it back in and calls it employer subsidy", where does he add it back?

Related information: What is Employer Sponsored Coverage?

[Jo_Andy]

Both amounts are listed under deductions.  I am trying to figure out if I qualify for the $3,000 Public Safety credit.  When an PSO reaches a certain management level, the portion that the disability retiree would normally pay is covered by the employer as a benefit.  I guess that is why they are calling it a subsidy.  So, I am guessing since it offsets the exact amount deducted on the paycheck that I don't qualify for the $3k because I am not actually paying the premiums even though they are a deduction.  I thought I could take the deduction as a medical expense and the subsidy as a deduction from medical expense as a reimbursement.  However, when I looked at it more closely the language states reimbursement for out-of-pocket expenses reimbursed by insurance company.  These are not medical expenses; they are premiums, and the reimbursement is not from the insurance company it is from the employer.  What is your take on this?

[GeorgeM777]

Following-up on the comments from @HelenC12, where exactly is the subsidy appearing.  For example, is it on your W-2, and if so, in what box is the subsidy appearing? 

As we understand the Public Safety credit, you can elect to exclude from income distributions made from an eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. The premiums can be for coverage for you, your spouse, or dependents. The distribution must be made directly from the plan to the insurance provider.  You can exclude from income the smaller of the amount of the insurance premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income. The amount excluded from your income can't be used to claim a medical expense deduction.

@Jo_Andy

[Jo_Andy]

Yes, read all that, too.  Both the deduction for the Health Premiums and the subsidy are under deductions so one zeros the other out having no impact on my gross.  Neither appear on my 1099R.

[Vanessa A]

That means it is correctly entered and reported.  Your Health Insurance Premiums that are covered by a subsidy should have no impact on your return. 

[Jo_Andy]

Didn't answer the original question.  I am trying to find out if I qualify for a Public Safety Officer $3000 credit on my return.  I am on disability retirement  which started after the normal age for retirement.  In the deductions portion of my pay check is shows a deduction for my health insurance premiums.  Then it shows a subsidy for the exact amount to zero out the deduction  since medical is part of my retirement benefit.

[ThomasM125 · Accepted solution]

I am assuming you are asking about the Retired Public Safety Officer Pension Exclusion.

From what you describe, the health insurance premiums are deducted from your pension distribution, then reimbursed, or added back in. If so, you are not actually paying the premiums, so you would not be entitled to the exclusion.