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Your Health Insurance Will Not Be Taxed Next Year

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There is another email making the rounds that claims that the new health reform law requires that you pay taxes on your employer-sponsored health insurance. It's not true. Politifact rates this email "pants on fire" and Snopes also rates this "false."

The email says the following:

Starting in 2011--next year--the W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are provided. It doesn't matter if you're retired. Your gross income WILL go up by the amount of insurance your employer paid for. So you'll be required to pay taxes on a larger sum of money that you actually received. Take the tax form you just finished for 2009 and see what $15,000.00 or $20,000.00 additional gross income does to your tax debt. That's what you'll pay next year. For many it puts you into a much higher bracket. This is how the government is going to buy insurance for fifteen (15) percent that don't have insurance and it's only part of the tax increases, but it's not really a "tax increase" as such, it a redefinition of your taxable income.

Politifact explains why this is not true about as well as anything I could write, including the following explanation (although Politifact does acknowledge that there is one piece of the email that is accurate):

The chain e-mail is correct that employers will be required to start listing the cost of insurance. The requirement starts for the tax year 2011, so employees will see it on the W-2s they receive in 2012.


But that amount will not be taxed.
Current law excludes health insurance from taxable income, and there's nothing in the health care law that changes that.

Why is this provision in the law? It is there to assist the IRS in determining who has health insurance and who does not, because when health reform is fully implemented, there will be penalties for people who do not have health insurance and increased taxes starting in 2018 for the so-called "cadillac" plans -- plans that have a value above $10,200 for individuals and $27,500 for family policies.

Requiring employers to report the value of the health insurance they provide employees is not a bad idea, by the way. Most people have little idea how much their employer contributes, because they pay only a portion of the premium -- usually around 20 to 30%. The W2 will make it clear just what the value of that insurance is to the employee.

If you want an excellent summary of the provisions of the new law, go to the Kaiser Family Foundation (no relation to Kaiser health plans) website and look at the section on "new taxes." As mentioned above, employer provided health insurance is NOT taxable and the law does NOT change that provision.

There are no fewer than 4,250 "hits" on Google related to the key words "HR3590 and 2011 W 2 forms". Most of these sites repeat the misrepresentation of this provision in exactly the same words as the original email. Few sites question the accuracy of the information and most are fairly hysterical about it. In fact, I was only able to make it through 8 pages of the Google search before I gave up on websites such as well regulated American militias, swamp bubbles, duck south, and divorce forum. So if you receive this email or hear about it -- pass along the accurate information!

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