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?

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    The big problem with the question is that we are to assume the two polices are equal. For this to be true your company had to pick a very expensive plan and also cover almost no part of the premium. – mhoran_psprep May 12 '13 at 19:52

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.

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  • are you sure health insurance premium is deductible? IIRC its not. – littleadv May 12 '13 at 19:51
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    Medical care expenses include the insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. If you are an employee, medical expenses do not include that portion of your premiums treated as paid by your employer under its sponsored group accident or health policy or qualified long-term care insurance policy. – JTP - Apologise to Monica May 12 '13 at 20:52

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