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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

Health insurance rebates: Taxable or tax-free?

By Kevin McCormally





JewishWorldReview.com | American health insurance companies recently showered over $1 billion in rebates on policyholders -- refunding premiums paid in 2011 that fail to meet the so-called 80/20 rule imposed by the health care reform law. If you're among the lucky recipients, will the rebate be a double-edged sword? Will it be considered taxable income?

We'll get to that. But first a quick review of what's going on.

Under that 80/20 rule, health insurers are required to use no more than 20 percent of premiums for overhead and profit, with at least 80 percent going to cover the cost of health care and quality improvements. For large group plans -- those covering more than 50 employees -- a more stringent standard applies. They must spend at least 85 percent of premiums on health care and improvements. To the extent a company misses the mark, it must rebate sufficient premiums to bring it into line.

Rebates were to be made by August. 1. The average rebate is about $151.

TAXABLE FOR TAX-FREE?
As with most tax matters, the answer is: It depends. The principle here is easy to understand. If you got a tax break for money spent in 2011 and you get some of that money back in 2012, Uncle Sam wants to retrieve part of the tax break, too. Putting this principle into practice gets tricky, though.

Individual policies
If you had an individual policy in 2011, the tax status of any rebate will turn on whether you deducted the premiums you paid. If you're among the two-thirds of all taxpayers who claimed the standard deduction rather than itemizing, you can be sure the rebate will be tax-free.


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Even if you itemized, there's a good chance it will be tax-free because three-fourths of all itemizers do not deduct medical expenses. That's because you can do so only if your qualifying expenses (including health insurance premiums) exceed 7.5 percent of your adjusted gross income.

If you did deduct medical expenses, however, all or part of the rebate will be taxed. How much depends on how much your total itemized deductions exceeded the standard deduction for your filing status.

Group plans
If you get your health insurance at work, the tax treatment of a rebate will depend on how you paid your share of the cost of health insurance and how the rebate is delivered.

If you paid the premium with after-tax dollars, the rebate will be tax-free.

If, as is common, your employer has a program to allow employees to pay their health care premiums with pretax dollars, then the rebate will be taxable.

If your employer gives you your share of the rebate as cash, that amount will be treated as extra 2012 compensation -- it will show up on your Form W-2 -- and both income tax and Social Security tax will be withheld. (This settles the score because in 2011, when the pretax money was used to pay the premium, that amount avoided income and Social Security taxes.)

Your employer might instead use the rebate to reduce your health premiums in 2012. That might sound like a way around the taxing issue, but it's not.

Let's say your rebate is $100 and that income and Social Security taxes take a total of 30 percent of your pay. If you get cash, $100 will be added to your compensation and that will cost you an extra $30 in tax. If the rebate is used to reduce your premiums, $100 less of your salary will be deducted before taxes to pay premiums this year ... and that means your taxable pay will be $100 higher than if the rebate hadn't applied. That, in turn, will increase your tax bill by $30.

In both cases, though, you'll be $70 ahead.

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