jIM wrote:
> I have a general question for retirement spending and tax planning.
>
> Assume someone retires around age 50-55, with assets in a mix of
> taxable accounts, Roth accounts and tax deferred accounts.
>
> If person has to pay health care premiums, my understanding is these
> would be considered "pre-tax" items- the premiums lower taxable
> income. I am curious how this works on three levels.
Actually, it doesn't work at all. The only time health insurance
premiums would be fully deductible (pre-tax) is if they were provided
under an employer plan, or if you are self-employed and not eligible to
be covered under an employer plan for you or your spouse.
Otherwise, the best you can hope for is to deduct only the amount of
premiums over 7.5% AGI, and only if you itemize deductions. Even
medicare premiums paid out of Soc. Security, and High Deductible Health
Plan (HDHP) premiums in conjunction with an HSA (Health Savings
Account), are subject to these limits. Even the exception for early
withdrawal penalties in an IRA to pay for health insurance is subject to
7.5% AGI, and it's still fully subject to ordinary tax.
Where did you get the idea that there would be no tax on income used to
pay health care insurance premiums? Perhaps some background would help
to clarify the misunderstanding.
-Mark Bole
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