It’s that wonderful time of year when we have the pleasure of filing our taxes, but it doesn’t have to be dreaded. How does a bit of tax savings sound? More specifically, the 20-25% tax savings on your health benefit plan. Whether it’s a Flexible Spending Account, a Health Reimbursement Arrangement or a Health Savings Account, all have tax-saving advantages.
Flexible Spending Accounts provide tax saving advantages for both the employee and the employer. Both parties save on taxes and therefore increase their spendable income. Employee’s pretax contributions are not subject to federal, social security taxes and state taxes in most states. Employers will save on the employer portion of FICA, FUTA and Worker’s Compensation insurance premiums.
Health Reimbursement Arrangements provide valuable tax relief to business owners and their employees. Employer tax advantages include reimbursements of qualified claims being tax-deductible, and knowing the maximum expense related to the health care benefit. For employees, reimbursements may be tax free for qualified medical expenses. Employer contributions can also be excluded from the employees’ gross income.