125 cafeteria plan

[cptacek]

I am looking into our benefits for next year. I am planning on having a surgery next year, and so I will get the best insurance offered by our company. That means $500/$1000 deductible ($500 for me and $500 for DH) and $1000/$2000 copay ($1000 for me and $1000 for DH). Plus, I'm taking quite a few medicines to try to get my ovaries to cooperate, almost $100 a month in copays for that. Although, hopefully after the surgery, we won't need so much of that.

I'm trying to decide if contributing to the 125 plan is the right thing to do...thinking $3000? (This year doing $25 per paycheck, or $650/year) This is the plan that the money comes out before taxes and you submit receipts and get that money reimbursed. However, we don't hardly pay taxes, because as a farm/business, we have been able to bring our taxable income down to pretty much nothing due to large equipment purchases. That or we aren't making that much. Tomato/tomahto.

It seems to me that if the 125 Health contribution is before social security taxes it is worth it, but if it is just federal/state income tax, it wouldn't be that helpful. Any suggestions?

[dczech09]

125 cafeteria plans are pre-tax all the way meaning that they won't be considered part of your state taxable, federal taxable, social security, or medicare wages. This is a great way to save money on taxes. I have a 125 plan myself that I contribute a small amount into. I use this as sort of an insurance policy for my deductilbe, so in the event I have to spend money for the health deductible, I can get reimbursed. On the otherhand, even if I don't use it, its there to help keep me in a lower tax bracket and save on taxes.