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I understand the concepts from this question and everything I have read says that the benefit of pre-tax expenses are that they reduce your taxable income.

But to keep the math simple, let's say that it costs me $900 monthly to insure my family privately and my employer's plan costs $1200. Let's also say I pay a 25% tax rate. Assume the coverages are equal.

Since $900 is 75% of $1200 and my take-home pay is 75% of my pay rate, do the plans essentially "cost the same"?

Or is this faulty thinking?

Community
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1 Answers1

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I'd say you got this pretty close. The $900 multiplies to $10,800, and becomes a Schedule A deduction to the extent that it exceeds 10% of your adjusted gross income. The $1200 company plan simply comes off the top for tax purposes.

JoeTaxpayer
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