Health Insurance Deductible: how does a health insurance deductible work

Label: how does a health insurance deductible work

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how does a health insurance deductible work?

The Federal Council is responsible for preparing a report on the tax deductibility of health insurance premiums. This report will dig the following points:

a. the ability to deduct fully or at least a much greater extent than is the case today, the insurance premiums from taxable income under the perception is direct federal tax or cantonal tax, or both;

b. the effect of the poverty trap that is inherent in the tax system;

c. capping the deductibility arranged to allow full or almost full deduction of premiums, without result in excessive bureaucracy;

d. the revenue losses entailed a change of system.

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The tax deductibility of insurance premiums is now capped so that it is possible to infer that part of the actual cost. However, as these premiums - at least about the basic health insurance - are de facto mandatory social security contributions, we do not see why they are not fully deductible.

how does a health insurance deductible work ?

It is also to be noted that, as the low-income benefit from a reduction of premiums and insurance premiums weigh little on the big budget revenues, the current system essentially penalizes the middle class.

In his response to my motion 11.3193 ("Federal Direct Tax. Integral Deductibility of premiums for health insurance"), the Federal Council stated that deductions for health insurance premiums fall into the category of deductions relating to fiscal policy, which applies a capped deductible.

2- how does a health insurance deductible work ??

This statement does not correspond to reality. Since it became mandatory health insurance contract, the payment of premiums is tantamount to a compulsory levy, with the difference that other equally compulsory levies (e.g.,. AVS contributions or AI) are themselves fully deductible or not even enter the taxable income. In fact, the introduction of Medicare "social" should logically be accompanied by a change in the tax system, which was not the case.

The current system, which combines mandatory taxes and reduced insurance premiums, is a poverty trap, to the extent that any increase in the primary income leads to a decrease in disposable income. The issue should in any case be investigated.

3- how does a health insurance deductible work ..?

My two motions 11.3192 ("Income Tax. Integral Deductibility of premiums for health insurance") and 11.3193 were dismissed after a general debate conducted on the basis of a response from the Federal Council who held not fully reflect the reality. As he seems legitimate to ask the questions they raised are reviewed, thoroughly this time.

Opinion of the Federal Council of 23.11.2011

In its responses to motions Humbel 10.3326, 10.4110 and Lumen Hochreutener 11.3192 and 11.3193, the Federal Council has refused to raise the standard deduction for insurance premiums and interest on savings and capital to make deductible the actual costs of premiums 'insurance. He believes it is unnecessary to prepare a report on the tax deductibility of contributions to health insurance since it can respond directly to questions raised by the assumption (with the exception of b that must be subject to review as part of another study).

a. The author argues that the assumption of insurance premiums are "mandatory social contributions" and it is normal that these mandatory withdrawals are treated for tax purposes as contributions to the AVS or AI (total deductibility or much larger than at present contributions to health insurance for direct federal tax and / or cantonal income taxes).

4- how does a health insurance deductible work ?!

Social insurance are treated for tax purposes on the basis of the correspondence principle: contributions to the Retirement System paid by the contributor are deductible from the tax base on income, but the assets paid at a later date are taxable upon payment (delaying the payment of taxes). It is the same about disability insurance, unemployment insurance and the benefits for loss of earnings. By cons, it is not justified to apply this principle to the deductibility of insurance against non-occupational accidents (premiums of insurance against occupational accidents are paid by the employer), as well as deduction for insurance premiums and interest on savings capital, which include the mandatory health insurance contributions.

b. The text says that the premise is to combine premium reductions in the tax law as it exists today cause threshold effects ("poverty trap"). In response to the motion 10.3340, the Federal Council calls for the drafting of a report on how the taxation of social assistance and other transfers (which include reductions in insurance premiums) are affects income freely available in case of exemption of the minimum subsistence and how the problem of threshold effects can be mitigated through this.

c. The possibility of deducting the actual cost of insurance premiums complicate the tax system in relation to the variation of the standard deduction, as explained in the Federal Council's response to the motion Hochreutener 11.3192. This would also be the case if the deduction were capped. In general, it should be noted that due to the progressiveness of the income tax, tax deductions alleviate a greater extent higher than the lowest income revenue.

d. The premise application to quantify the impact of the tax deductibility of contributions to health insurance. The financial implications have already been mentioned in the responses to the four motions initially cited. If the standard deduction for insurance premiums and interest on capital savings was raised to 4200 francs (8400 francs for spouses), for example, decreases in revenue for the federal direct tax would amount to 620 million francs. If the actual cost of insurance premiums (insurance required under the premium reductions, private supplementary health insurance and accident insurance in excess of the mandatory minimum) were deductible, the revenue reductions on the based on actual data for the year 2010 are estimated at 645 million francs. Furthermore, the possibility of deduction lead to unwanted side effects, namely that households who choose expensive insurance solutions could tax higher than households that do not have the means deductions claimed on their tax opt for such insurance. This would encourage taxpayers less to change health insurance or choose a higher deductible when premiums increase, which, again, would tend to rise the cost of health care. If only a deduction equal to the amount of the most advantageous compulsory health insurance were granted, the shortfall would be between 130 and 465 million francs, according to the selected deductible (2012 tax year).

how does a health insurance deductible work Fin