Pretax vs Post tax question

[jayk2k3]

Post tax vs pretax question
Hello all, I’m try to decide if I’m doing the right thing. I think it cheaper and better insurance if I get post insurances for me and my son. I can get insurance through my company for us $144 a week vs $87 for post private insurance for me and my son. I make about 70k, and my wife make about 60k, she has her own insurance (expensive also but that another matter). Really my question is, is pretax saving me enough to justify going that route?

Company 144x52= 7488 Pre tax vs.
Post tax 87.5x52= 4550 Post tax
Savings ????????????

[corn18]

I have never heard of company provided insurance being pre-tax. If it is, then they should be reporting it as imputed income and it will be taxed as regular income when you file.

[Like2Plan]

Post tax vs pretax question
Hello all, I’m try to decide if I’m doing the right thing. I think it cheaper and better insurance if I get post insurances for me and my son. I can get insurance through my company for us $144 a week vs $87 for post private insurance for me and my son. I make about 70k, and my wife make about 60k, she has her own insurance (expensive also but that another matter). Really my question is, is pretax saving me enough to justify going that route?

Company 144x52= 7488 Pre tax vs.
Post tax 87.5x52= 4550 Post tax
Savings ????????????

Jay,
May I assume you are comparing health insurance coverage between 2 policies?
If so, what is your marginal tax rate? Your pretax health insurance would be exempt from your federal, state and local taxes in addition to FICA taxes.

However, maybe your employer provided health insurance has better coverage with lower co-pays and a lower deductible?

[Petunia 100]

I have never heard of company provided insurance being pre-tax. If it is, then they should be reporting it as imputed income and it will be taxed as regular income when you file.

If the employer has a Section 125 Cafeteria Plan, then all deductions for benefits are pre-tax. Payroll taxes as well as income taxes.

[disneysteve]

Health insurance has always come out pre-tax my entire career so that's certainly not unusual.

OP, I would urge you to look beyond the price and really dig deep into comparing the two plans. Check all aspects of coverage, copays, deductibles, provider networks, prescription plans, etc. Make sure the cheaper plan isn't cheaper because it's inferior or will end up costing you more out of pocket. It's rather unusual for individual coverage to actually be cheaper and better than group coverage.

[Nutria]

disneysteve of course if OP is young and doesn't need much medical care, the cheaper plan might be adequate. (Agree, though, about how unusual for individual coverage to be cheaper than group coverage.)

[jayk2k3]

Sorry I was trying to say I think I would save more money if I get Private health insurance, instead of going though my company. My Company's plan seems very expensive to me. Private seem like a better insurance anyways. Not sure my effective tax is, but house house hold make 140k, two adults and one child.

[disneysteve]

Sorry I was trying to say I think I would save more money if I get Private health insurance, instead of going though my company. My Company's plan seems very expensive to me. Private seem like a better insurance anyways. Not sure my effective tax is, but house house hold make 140k, two adults and one child.

I think we all understood you. It's just very unusual for private insurance to be cheaper and better than group insurance so you want to be sure you're making an accurate comparison and not just going by price alone.

[Like2Plan]

Sorry I was trying to say I think I would save more money if I get Private health insurance, instead of going though my company. My Company's plan seems very expensive to me. Private seem like a better insurance anyways. Not sure my effective tax is, but house house hold make 140k, two adults and one child.

I'm not sure, either. There is a lot of variability in what your marginal tax rate could be. If you and your spouse just use the standard deduction ($25,100 for 2021). You and your spouse each could potentially be contributing $19,500 (each) pretax to a 401k? You probably get a child tax credit. Maybe you contribute to an FSA/dental plan that is also pre-tax? We don't know whether you pay a state tax (and if so, what the tax rate is for your state).

So, it would just be a guess on what your marginal tax rate is. It could work out that you are not saving much in taxes by going with the employer plan--so, may be not as much savings. On the other hand, maybe it is.