Recycled and UPDATED - Will My Health Insurance Be Taxable?

I have published this article twice already, but the rumor is still out there, plus the IRS recently issued more information for employers.
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(Originally posted June 27, 2010, and re-posted on July 21, 2010)

I saw one of my clients yesterday, and he asked me whether the rumor is true that the government is going to start taxing people on health insurance provided by their employers. The answer to that question is, NO.

My client is right that there is a rumor going around about this, including one of those wonderful "chain" e-mails that breathlessly states that starting in 2011, you'll be taxed on employer-provided health insurance and that you need to forward the e-mail on to all your friends.

As with most rumors like this, there is a small grain of truth here. The health care bill passed in the spring does indeed impose an excise tax on employer-provided health insurance (this is the so-called "Cadillac Tax" that you may have heard of). Here are the facts about this excise tax:

•The tax starts in 2018, not 2011
•The tax applies only to employer-provided health insurance that exceeds $27,500/year, and the tax is imposed on the insurance company, not on you
•It is true that the value of your employer-provided health insurance will be reported on your W-2 starting in 2011, but that's all -- it will be reported on your W-2 but it's not a taxable item to you; it will be shown for reporting purposes only.

UPDATE ON OCTOBER 25, 2010: The IRS says that employer reporting of health insurance on the W-2 will be optional for 2011. So, your 2011 W-2 may or may not show the value of employer provided health insurance. At any rate: you will not be taxed on this! It will be shown on the W-2 for informational and reporting purposes only.

Snopes.com provides more information about the original rumor:
http://www.snopes.com/politics/taxes/hr3590.asp