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Congressman Chaka Fattah Intro's Healthcare Premium Pre-Tax Legislation.

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Congressman Chaka Fattah (D-PA) – ranking member of the Appropriation Committee’s subcommittee on commerce, justice, science and related agencies – introduced legislation this week that would allow individuals to pay for health care with pre-tax dollars.

Fattah said his legislation – House of Representatives Bill No. 3791 – would allow individuals who are not otherwise enrolled in a group insurance plan to file and take above-line deductions on their tax returns to cover health insurance premiums. Fattah said HR 3791 would benefit civil service employees and military retirees.

Currently, these individuals are exempt from paying income taxes on these dollars if their medical expenses exceed 7.5 percent of their adjusted gross income.

HR 3791 would do so by amending the Internal Revenue Code of 1986.

“Individuals in this country now have an opportunity to benefit from the Affordable Care Act and the Health Insurance Marketplace, however, there should be parity in the tax code for purchasing health insurance premiums,” Fattah said via a statement released by his office. “This bill directs that anyone who is purchasing insurance outside of an employer-based plan will now be able to pay for that insurance with pre-tax dollars.”

According to Fattah’s office, Current tax law handles payments for health insurance premiums in different ways. Premiums for individuals who purchase insurance through their employers are exempt from both income and payroll taxes. However there are individuals, like government retirees, who are only exempt from income taxes. The Healthcare Premium Parity Act will allow these people to take a deduction on their tax returns for the amount of their health insurance premiums. This above-the-line deduction would subtract the cost of the health premium from an individual’s adjusted gross income.

HR 3791 now awaits a hearing in the Ways and Means Committee.

“While the vast majority of Americans will continue to receive health care via their employer, we should be making it easier and more cost-effective for those who are now turning to the Marketplace as a result of the Affordable Care Act,” Fattah said. “Not only will this legislation provide an added incentive to purchase a health care plan, it will in turn lower the cost of healthcare for all Americans.”

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