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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
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Experience:  15+ years tax preparation and tax advice.
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State wages higher than federal, because of health insurance

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I received my W2, and found that the State(NJ) wages are higher than the federal wages (Box 16 is higher than Box 1). This is because the pre-tax deducted health insurance premium deducted by the employer are included in the state wages.<br /><br />E.g: <br />Federal wages: 75000 (Box 1)<br /> Health Insurance premium: 10000 <br />State Wages = 85000 (Box 16)<br /><br />I also have deductibles, copayment amounting to 5000 USD for the year. Thus the total amount for Medical Expense comes to 15000 USD.   <br /><br />Now my questions are: <br />a) Can i use the 15000 as a medical deduction / expense while i file my state return? Thus what amount will i enter for Point # XXXXX(Medical Expenses) on the Tax Return Form (NJ-1040)? <br /><br />b) Do i need to provide any proof/documentation for this? I have the statements from my insurance company for co-payments, my check copy for the deductible, and my last december 2010 payslip which shows the health insurance premium paid for the year(i.e. 10000). Is this enough? <br /><br />c) Am i eligible for e-filing the state return in case of the above scenario? <br /><br />Any help will be highly appreciated.<br /><br />Thanks! <br /><br />P.S: <br />** My health insurance premium is higher than the 2% of the gross. Its obvious but wanted to mention it. <br />** This is only for the state return since i am going for standardized deduction for federal.
Submitted: 4 years ago.
Category: Tax
Expert:  Wendy Reed replied 4 years ago.

Thank you for giving me the opportunity to assist you. I will give the best answer that I can with the information provided.




1. Yes, you can use the insurance premiums plus all other medical expenses added together as a deduction on your NJ state return. NJ state limits your deduction to the amount in excess of your NJ gross income. If you are doing the return by hand, you must figure out the entry number yourself. For example, if your State Income is 85000, 2% of this is 1700, so 15000 - 1700 = 13300. If you are using software, enter your total medical expenses and the program should figure it out for you.


2. You do not need to attach or provide documentation with the return. In the event of a NJ audit of your medical expenses (rare) you would need to provide documentation at that time.


3. Yes, you are still eligible to efile or Webfile your NJ return with medical expense deduction.


Please let me know if you have additional questions.

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3346
Experience: 15+ years tax preparation and tax advice.
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