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I am retired from a school district and it provides an early…

Customer Question
I am retired from...

I am retired from a school district and it provides an early retirement benefit cash payment that is conditioned on buying health insurance in the school district's health plan. Ending the health insurance would end the cash payment.

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

My w2 shows the cash payment as straight income. Can I somehow file my income tax to remove the health insurance payment from adjusted gross income or is my only option for tax reduction to itemize?

Accountant's Assistant: Is there anything else the Expert should be aware of?

The policy is high deductible but has some co-pays that exclude me from purchasing health savings account so that option does not exist either.

Submitted: 9 months ago.Category: Tax
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9/24/2017
Tax Professional: Robin D., Senior Tax Advisor 4 replied 9 months ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 18,061
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 9 months ago

The premiums you pay for health insurance can come out of your paycheck before your income taxes are calculated. Your income appears smaller.

That would mean you’ve paid premiums with pre-tax money. Pre-tax means you already received a tax benefit by not paying taxes on it, so you can’t get a second benefit on the same dollars. In other words, you cannot claim them as a deductible expense.

If the premiums are not pre-tax then you would have to itemize to claim a deduction.

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Customer reply replied 9 months ago
Why can't the school district make the payment as pre-tax now?
Tax Professional: Robin D., Senior Tax Advisor 4 replied 9 months ago

Their plan is most likely not written to cover that. To offer you pretax health insurance, your employer must establish a plan that meets Section 125 of the Internal Revenue Code; this type of plan is also called a cafeteria plan. As this is toed to the cash payment they cannot do that unless the plan allows for the pre tax nature. Early retirement means not an employee any longer and Sec 125 plans are for employees.

I wish I could tell you differently but unfortunately you will have to itemize if you wish to deduct the amount.

A positive 5 star rating is appreciated so I am credited for responding to to your question

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