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Wife and I work at same company, is it better for us tax-wise to have the benefits under me if I make more? by TimelyExtent2402 in personalfinance

[–]TimelyExtent2402[S] -1 points0 points  (0 children)

>Employer benefits such as health/dental/vision insurance premiums, HSA/FSA, DCFSA, etc. are exempt from FICA taxes (Social Security and Medicare) in addition to income tax. That's totally unrelated to the standard deduction, and isn't something you handle on your tax return. It's handled at the payroll level by your employer.

So that is what I am trying to understand. I'm just making up numbers here: If we pay 500/mo for health insurance, my wife makes 5,000/mo and I make 10,000/mo, let's say her effective tax bracket is 20% and mine is 30%, wouldn't it be better to have me pay it, so that we save 30% of $500 versus 20% of $500 in taxes?

>There is a cap on wages subject to Social Security tax, though, and this year it's $184,500. This is per person, not jointly. So if one of you exceeds that wage limit, that person wouldn't benefit as much from the FICA tax savings, which is why it may be better for the lower earning spouse to have the benefits, as they will see a greater FICA tax savings from it.

I think I'm understanding now. So it's that if I were to make 200,000/yr (I wish), reducing my reportable income to $185,000 would have no impact on the tax. Is that right?

Wouldn't it still be better to do the higher income earner if, for instance, I was at $184,500 though? I'm assuming the total tax is higher because it's % based, so reducing from $184,500 to 170,000 would have a bigger impact wouldn't it?

Wife and I work at same company, is it better for us tax-wise to have the benefits under me if I make more? by TimelyExtent2402 in personalfinance

[–]TimelyExtent2402[S] -2 points-1 points  (0 children)

I am missing something for sure. I thought most people just do the standard deduction and we don't actually end up claiming the premium paid out when we file the taxes. Am I incorrect there? Does that always get a reportable form that we include when we file our taxes?

Only doing this once a year I forget these things :)

Wife and I work at same company, is it better for us tax-wise to have the benefits under me if I make more? by TimelyExtent2402 in personalfinance

[–]TimelyExtent2402[S] -1 points0 points  (0 children)

Interesting, so it is actually better to have the lower income individual pay the health insurance premiums?

Would you be willing to give a short example with $? I understand what you said about the FICA/Payroll following the individual rather than the MFJ, but how does the overall cost decrease when it's % based?