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Is Medical Insurance Tax Free?

If it is purchased by the employee, everything is tax free. But what if it is purchased by the taxpayer’s employer?

Below are some quick and dirty rules for employer-purchased medical insurance.

  1. Employer-paid premiums is excludable from gross income.
  2. Amount recovered under medical policy is excludable from gross income.
  3. Amount recovered under a medical policy for loss of a function or for disfigurement is excludable from gross income.
  4. Any additional amounts paid under the policy are not excluded from income.

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