Which is right for you? High-Deductible vs Low-Deductible Health Insurance Plans.

 

Key Points

• Low deductibles are preferable when an illness or injury necessitates expensive medical care.
• High-deductible plans provide more affordable premiums and access to HSAs.
• Health savings accounts offer three tax advantages and can be a source of retirement income.
• If you are young and healthy and require minimal medical care, a high-deductible plan may be the best option for you. On the other side, a smaller deductible may be more enticing if you are older, have a chronic health condition, participate in high-risk sports or activities, are pregnant or expect to become pregnant in the future, or require expensive prescriptions.

 

It pays to be prepared whether enrolling in your employer's health insurance plan for the first time or updating your existing coverage. You may ask whether a high-deductible or low-deductible plan makes more sense.

 

As with the majority of concerns regarding benefits, there is no one-size-fits-all response to this inquiry; rather, it relies on your specific need.

 

Is a high deductible health plan good?

 

A high-deductible health plan, often known as an HDHP, is characterized by its higher deductible, which must be satisfied before the plan's benefits become active for anything other than preventative care services received within the provider network. Any health insurance policy with a deductible that is higher than $1,400 qualifies as a high-deductible plan. for individual coverage and at least $2,700 for family coverage, opens in a separate window.

Once you reach that limit each year (which includes what you pay for your deductible, copayments, and coinsurance), the insurance company pays one hundred percent of the allowable amount for the remainder of the calendar year. High-deductible plans typically have higher out-of-pocket maximum limits than other types of plans.

For the tax year 2022, the maximum annual out-of-pocket expenses for individual plans cannot exceed $7,050, and the maximum annual out-of-network expenses for family plans cannot exceed $14,100.

You will receive the benefit of a lower premium if you select one of these plans, despite the fact that your deductible will be higher if you do so. That is a benefit, provided you do not experience any health issues and do not ever need to reach either your deductible or the out-of-pocket maximum limit.

Another significant benefit of high-deductible health insurance is that eligible plans often include a health savings account (HSA), which can be used to better control the costs of medical care.

 

Low-deductible health plan basics

 

Plans with a low deductible have a lower out-of-pocket expense threshold, which means that if you become ill, you will be responsible for paying a less sum of money before your insurance company begins to pay. When you have coverage with a low deductible, you will be responsible for paying a higher monthly premium. This is the cost of doing business.

If you don't end up requiring more comprehensive medical care, you will have spent a higher monthly premium for nothing even if you purchased one of these plans, which is an obvious disadvantage. In the event that you become really ill, sustain an injury, or require surgical treatment, having health insurance with a low deductible will make it much simpler for you to prepare for and control your out-of-pocket medical costs. Because the deductible is so much less, you won't have to stress about paying a significant amount of money out of pocket.

However, if you want a smaller deductible, you will have to give up something else in exchange for a reduced monthly premium, and that something is a health savings account.

 

High Deductible vs Low Deductible? Which is right for me?

Taking into account your current state of health is the quickest and easiest way to determine whether or not a plan with a low or high deductible is the better financial choice.

If you are young and in good health, you may be less likely to require anything other than preventive care. If this describes your situation, a plan with a high deductible may be the better option for you. On the other hand, if you are older, if you have a chronic health condition, if you participate in high-risk sports or activities, if you are pregnant or if you plan to have a child at some point in the future, or if you require pricey prescriptions for a health issue, then a lower deductible may be more appealing.

It is also beneficial to evaluate both your savings and your budget. Think about how simple it would be for you to cover a larger deductible if that were necessary. Also, if your employer offers a high-deductible health insurance plan as a benefit to their employees, you should consider how much you would be able to contribute to your HSA each year.

The maximum amount that can be contributed to an HSA each year is capped at $3,650 for persons with self-only coverage and $7,300 for those with family coverage in 2021.

When considering a plan with a low deductible, you should consider how much you are able to spend on the monthly cost. Weigh this against the advantage of being able to get covered medical services when you need them without having to pay a considerable amount of money toward the deductible.

Below chart provides a comparable picture of high deductible and low deductible plan

	High-deductible health plan (HDHP)	Low-deductible health plan (LDHP)
Monthly premium	Lower than LDHP to account for increased financial risk	Higher than HDHP to account for reduced financial risk
Annual deductible	Individual: at least $1,400 Family: at least $2,800	Individual: less than $1,400 Family: less than $2,800
Out-of-pocket maximum limit	Individual: $7,050 Family: $14,100	N/A
Coinsurance	Depends on the plan, but typically higher than LDHP	Depends on the plan, but typically lower than HDHP
HSA-compatible?	Yes, as long as you have a qualified-HDHP, per IRS regulations	No
Integrated HRA compatible?	Yes	Yes
Individuals should consider if:	You’re young and healthy You expect to be a low user of your health plan (i.e. you only need routine care, generic prescription drugs, or preventive care) You want to open an HSA You can’t afford the premiums on an LDHP	You’re older or in poor health You expect to be a high user of your health plan (i.e. you have a serious medical condition or chronic illness) You want to limit your exposure to high medical bills
Employers should consider if:	Your employees are young and healthy You can’t afford the premiums on an LDHP You want to supplement your plan with an HSA or GCHRA	Your employees are older, have a chronic health condition, or have ongoing treatment You have a large health benefits budget You want to keep employee out-of-pocket costs as low as possible

 

The choice of the appropriate insurance plan constitutes both a tax and an investment strategy. Please let us know if there is any way we can assist you with the planning of your taxes.

 

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

 

 

Types of authorizations for third-party representatives

[Source IRS]

When working with the IRS, taxpayers have a right to represent themselves. They can also choose a third-party agent to represent them, like a tax professional or family member. Taxpayers should be sure that their representative is authorized to practice before the IRS.

Taxpayers who want to have a third party represent them must formally grant them permission to do so.

Here are different types of third-party authorizations:

• Power of Attorney - Allows someone to represent a taxpayer in tax matters before the IRS. The representative must be an individual authorized to practice before the IRS.
• Tax Information Authorization - Appoints anyone to review or receive a taxpayer’s confidential tax information for the type of tax for a specified period.
• Third Party Designee - Designates a person on the taxpayer’s tax form to discuss that specific tax return and year with the IRS. 
• Oral Disclosure - Authorizes the IRS to disclose the taxpayer’s tax info to a person the taxpayer brings into a phone call or meeting with the IRS about a specific tax issue. 

Even with an authorized third party representing them, taxpayers are ultimately responsible for meeting their tax obligations.

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

 

 

Got an IRS Notice or Mail: What is the next step?

Mailing a letter or notice to a taxpayer is a common way for the IRS to ask questions, inform them of account changes, or request payment.

 

Key Points

• Don’t Panic: When receiving correspondence from the Internal Revenue Service (IRS), neither panic nor disregard is warranted.
• Read carefully: Since each notice addresses a unique question, it's important to read it in full before responding.
• Review Information: If the requested alteration pertains to your tax return, the notice from the Internal Revenue Service (IRS) should provide all the relevant details. Take a look at the updated version of your tax return.
• Tax Action: Within the specified time frame, you must take the necessary steps, which may include making a tax payment or providing additional documentation.
• Dispute: If there is a dispute, contact the IRS within the allotted time to let them know. Send the letter to the address shown on the back of the contact slip to resolve the disagreement.
• Documentation: Keep documentation of all correspondence, disputes, dates of responses, etc.
• Hire a Professional: If you feel overwhelmed by the task at hand, a tax professional should be consulted.

At Sure Financials and Tax Services LLC, we represent our clients before the Internal Revenue Service and state tax authorities. To contact us, please call 908-300-9193 or send an email to services@surefintaxsvs.com.

Sure Financials and Tax Services LLC

Phone:+1.908.300.9193, Fax:+1.855.753.0066

Email:services@surefintaxsvs.com | Web: https://surefintaxsvs.com

 

 

New Property Tax Benefit for NJ Resident | Claim It!

Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) 

The state of New Jersey is offering a new property tax relief program that is replacing the previous Homestead Benefit program. The Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) program will benefit a large number of homeowners and includes tenants. 

1.1         Eligible Homeowner 

• Taxpayer owned and occupied a home in New Jersey that was your principal residence (main home) on October 1, 2019; and 
• 2019 property taxes were paid on that home: and 
• Taxpayer 2019 New Jersey Gross Income was $250,000 or less. 

1.2        Eligible Tenants 

• As on October 1, 2019 
• Rented an apartment, condominium, or house. 
• Rented or owned a mobile home located in a mobile home park. 

1.3        Eligible benefit (Homeowners) 

• $1,500 for taxpayers with 2019 gross incomes up to $150,000 
• $1,000 for those with 2019 gross income above $150,001 but no higher than $250,000.  

1.4       Eligible benefit (Tenants)  

• $450 for those with 2019 gross income up to $150,000 

The taxpayer can file this benefit once the taxpayer receives filing information (PIN and ID from the state). 

Following is the updated mailing schedule for the ANCHOR program. Check your mailbox and make sure this information gets to you. 

 

County	Mailing Expected to Begin	Email Delivery Expected to Begin
Burlington, Hunterdon, and Mercer	September 12, 2022	September 13, 2022
Atlantic and Essex	September 14, 2022	September 13, 2022
Bergen and Warren	September 16, 2022	September 16, 2022
Ocean, Salem, and Sussex	September 19, 2022	September 20, 2022
Cumberland, Gloucester, and Hudson	September 21, 2022	September 20, 2022
Monmouth and Somerset	September 23, 2022	September 23, 2022
Passaic and Union	September 26, 2022	September 27, 2022
Cape May and Middlesex	September 28, 2022	September 27, 2022
Camden and Morris	September 30, 2022	September 29, 2022

 

Applications will be available this fall, and the deadline for submission is Dec. 30, 2022. The benefit will be paid no later than May 2023. 

Let us know if you need any help to claim this benefit. Call us on 908-300-9193 and email us at services@surefintaxsvs.com 

Who can claim HOME OFFICE DEDUCTION and what amount?

Strating from pandemic months, many taxpayers shifted their workplace and started working from home. Others quit their employment to launch their own companies or begin freelancing on the side, at which point they moved their operations into a home office that they had previously established.  

Some people who work from home are qualified to obtain a tax deduction for the expenses associated with their home office, but the majority of people who work from home are not eligible for this break.  

Home office expenses dependent on whether taxpayers work for a company or are self-employed, as well as whether taxpayer has a specific area of his/her home set aside as an office where he / she doesn't engage in any other activities. 

Unfortunately, taxpayers cannot take advantage of the tax break for a home office if the taxpayer is an employee working remotely rather than the owner of his/her own business (however some states do allow this tax deduction for employees). Employees were able to deduct unreimbursed employee business expenditures, including the home office deduction, prior to the Tax Cuts and Jobs Act (TCJA) being approved in 2017. Nevertheless, beginning with the tax year 2018 and continuing through the tax year 2025, these deductions for employee business costs will not be allowed. 

Mainly there are two tests one should fulfill to claim the home office deduction. These are (1) exclusive and regular use (2) principal places of business.  

Exclusive and regular use 

A taxpayer is required to use a section of his / her home, apartment, condominium, mobile home, boat, or another structure that is analogous to this one for the purposes of his / her business on a consistent and exclusive basis.  

The requirement that taxpayers must utilize a section of taxpayer house exclusively and consistently for business is the primary obstacle that must be overcome in order to qualify for these deductions. 

The exclusive-use condition is taken very seriously by the IRS, which is consistent with the interpretation of the statute.  

Example, consider that taxpayers have dedicated a space in his / her house to the operation of a full-time business, and that taxpayer spends ten hours per day, every day of the week, working there. If taxpayer break the exclusive-use provision by allowing his / her children to use the office to complete their homework, taxpayer will lose the opportunity to take deductions for a home office on his / her taxes. 

Exception to exclusive use 

• The day care center and the storage facility are two examples of exceptions to this guideline. 

Principal places of business. 

The taxpayer home should serve as the primary site of taxpayer's business or taxpayer's home office should serve as a place where taxpayer often meet with customers or clients.  

In addition to achieving the requirements for exclusive use and regular usage, taxpayer home office must also meet one of the following criteria: 

• it must be either the primary site of that firm or 

• a place where regular meetings with customers or clients takes place. 

 A taxpayer is exempt from either the principal-place-of-business test or the deal-with-clients test if the taxpayer's home office is located in a facility that is isolated from the rest of his / her house and stands on its own. For example, a detached garage that has been converted into an office. Taxpayer can be eligible for write-offs for his / her home-based business provided taxpayer can demonstrate that he / she meet both the exclusive-use and the regular-use requirements. 

Home office business deductions can be determined using either (1) actual method or (2) simplified method. 

According to the actual method, direct business expenses are assigned directly to the business, while indirect business expenses are assigned to the home office according to a certain allocation method, such as square footage or number of rooms. 

Simplified method makes use of a prescribed rate, which is then multiplied by the maximum square footage that can be occupied by the home. The prescribed rate for the year 2022 is $5 per square foot, with a maximum of 300 square feet per application. 

If the taxpayer intends to take home office expenses based on the actual method, then the taxpayer is required to file form 8829. However, if the taxpayer intends to take home office expenses based on the simplified method, then the taxpayer is only required to fill out line 30 of schedule C. 

The Simplified Method really simplifies many calculations just like its name suggests.  

• The taxpayer does not need to calculate depreciation for their home if they use the Simplified Method. 

• At the time of selling the use of the property, there is no need to consider depreciation recapture. 

• A taxpayer does not need to differentiate between personal and business use of his or her home in order to take advantage of itemized deductions for mortgage interest, real property taxes, and casualty losses related to his or her property.