Will My Health Insurance Be Taxed?

I saw one of my clients yesterday, and he asked me whether the rumor is true that the government is going to start taxing people on health insurance provided by their employers. The answer to that question is, NO.

My client is right that there is a rumor going around about this, including one of those wonderful “chain” e-mails that breathlessly states that starting in 2011, you’ll be taxed on employer-provided health insurance and that you need to forward the e-mail on to all your friends.

As with most rumors like this, there is a small grain of truth here. The health care bill passed in the spring does indeed impose an excise tax on employer-provided health insurance (this is the so-called “Cadillac Tax” that you may have heard of). Here are the facts about this excise tax:

  1. The tax starts in 2018, not 2011
  2. The tax applies only to employer-provided health insurance that exceeds $27,500/year and is imposed on the insurance company, not on you
  3. It is true that the value of your emloyer-provided health insurance will be reported on your W-2, but that’s all — it’s reported on your W-2 but it’s not a taxable item to you; it will be shown for reporting purposes only

Snopes.com provides more information: