2012 is the beginning of reporting the value of employer-provided health benefits on form W-2 and it may also be the beginning of the end of this tax benefit. There is little logic to continue this massive revenue loss.
Read more on Health Insurance Illuminated.
Starting in 2012 employers will be required to report the cost of employer-provided health care benefits in box 12 of your form W-2. The amount will use code “DD”.
The amount shown on the W-2 is for information purposes and is not taxable . . . for now. However, do not lose site of the fact that the tax-free status of health benefits is the single largest revenue loser for the federal government. The Simpson-Bowles Commission recommended a gradual phase out of this tax break.
Employer Provided Health Care Insurance: Exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038; Excise tax (on high cost plans) reduced to 12%.
Given the failure of the super committee of Congress to accomplish anything, this employee tax benefit is a prime target for dealing with the federal deficit. A change is unlikely to come all at once and it may be income sensitive, but it is hard to see how this plum will be left on the tree for much longer.
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