W-2 for employer paid health insurance marketplace premium - is this taxable income?
Hey tax people! I just got a weird W-2 form from my company that's separate from my regular paycheck W-2. This one is specifically for health insurance premiums they paid through the marketplace exchange. The strange thing is there's no federal tax withholding on it, only Social Security and Medicare taxes were taken out. I'm super confused about whether this counts as taxable income that I need to report. And if it is taxable, where the heck do I enter this in TurboTax? I've never had to deal with this situation before and I'm getting stressed since the filing deadline is coming up fast. The amount on the W-2 is about $4,850 which is what my employer contributed toward my marketplace plan last year. Does anyone know how to handle this? Thanks in advance!
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StormChaser
Yes, this is definitely taxable income. When your employer pays for marketplace insurance premiums, it's considered part of your compensation package and is treated as taxable wages. That's why you received a separate W-2 for it. The reason only Social Security and Medicare taxes (FICA) were withheld is likely because your employer's payroll system is set up that way, but you'll still owe federal income tax on this amount. In TurboTax, you'll need to enter this as an additional W-2. Just follow the same steps as you would for your primary W-2 - TurboTax will ask if you have additional W-2 forms to enter. Make sure you enter all the information exactly as it appears on the form. When you complete both W-2 entries, TurboTax will combine the income and calculate your total tax liability including this additional income. Keep in mind this could potentially push you into a higher tax bracket depending on your other income, so you might want to set aside some money for potential taxes due if you haven't had enough withheld elsewhere.
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Dmitry Petrov
•Thanks for the explanation! I'm in a similar situation but my employer's contribution was much smaller, like $1,200. Do you know if there's a minimum threshold where this becomes taxable? Also, will this affect my Premium Tax Credit calculation since technically my income is now higher with this included?
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StormChaser
•There is no minimum threshold for employer-paid marketplace premiums - the entire amount is considered taxable income regardless of how small it is. So your $1,200 would still need to be reported. Regarding the Premium Tax Credit, yes, this will affect your calculation because it increases your Modified Adjusted Gross Income (MAGI), which is what the IRS uses to determine your eligible credit amount. Since your MAGI will be higher with this income included, your Premium Tax Credit might be reduced. TurboTax will recalculate this automatically when you enter both W-2s.
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Ava Williams
I went through this exact same situation last year and was totally confused by the extra W-2. I spent hours trying to figure out what to do and called my HR department multiple times but they weren't very helpful. Finally found this tool called https://taxr.ai that helped me understand exactly what was going on. I uploaded both my W-2s and it immediately identified that one was for marketplace premium payments. The site explained that I needed to report it as income but also showed me how this affected my overall tax situation. It even pointed out that I qualified for an adjustment related to self-only coverage that my company's HR person didn't know about. The tool walks you through how to enter everything correctly in TurboTax, which was honestly the most helpful part because I was completely lost before that.
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Miguel Castro
•That sounds helpful. Does it cost money to use? My situation is even more complicated because I had marketplace coverage for part of the year, then switched to my employer's plan midyear when I became eligible.
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Zainab Ibrahim
•I'm always skeptical of these tax tools. How is this different from just calling the IRS helpline? And does it actually give you official tax advice you can rely on if you get audited?
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Ava Williams
•It has a free version that can analyze basic tax documents like W-2s and 1099s, which would probably cover your situation with the partial year coverage. The analysis shows you exactly which lines on your tax forms matter for your specific scenario. The difference from calling the IRS is that you get immediate answers without waiting on hold for hours. It's not technically "official tax advice" but it cites the specific IRS publications and tax code sections that apply to your situation. I printed those references and kept them with my tax documents just in case. The tool is really about helping you understand what's happening with your taxes rather than giving you a definitive ruling.
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Zainab Ibrahim
I was skeptical about using https://taxr.ai when I first saw it mentioned here, but I decided to give it a try with my employer marketplace premium W-2 situation. I'm really glad I did! The tool immediately identified both of my W-2s and explained exactly why I was getting a separate one for the marketplace premiums. What impressed me was how it showed me the relevant IRS rules about employer-provided health coverage through the marketplace and explained why Social Security and Medicare were withheld but not federal income tax. It even created a custom checklist of steps for entering everything in TurboTax. The best part was discovering I qualified for an adjustment I wouldn't have known about otherwise. Ended up saving me around $340 on my taxes! Definitely recommend trying it if you're dealing with this marketplace premium W-2 issue.
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Connor O'Neill
I had this same problem last year with the marketplace W-2. Spent literally FOUR HOURS trying to get through to the IRS to ask how to handle it. Kept getting disconnected or put on endless holds. Finally found this service called https://claimyr.com that got me through to an actual IRS agent in about 15 minutes. They have this video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that the marketplace premium W-2 is taxable income and explained exactly where to report it. She even stayed on the line while I entered it into TurboTax to make sure I did it right. Saved me so much frustration after days of trying to figure it out myself.
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LunarEclipse
•Wait, how does this service actually work? Do they somehow have a secret line to the IRS or something? I've been trying to reach someone about a similar issue for weeks.
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Yara Khalil
•This sounds completely made up. Nobody gets through to the IRS in 15 minutes, especially during tax season. I've been calling for THREE WEEKS about an issue with my account and can't get a human. If this actually worked, everyone would be using it.
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Connor O'Neill
•They use a system that navigates the IRS phone tree and holds your place in line. When they're about to connect you with an agent, you get a call back. You don't have to sit on hold for hours. It's not a "secret line" - they're just using technology to handle the awful hold times. I was super skeptical too until I tried it. I think what happens is most people give up after being on hold for 30+ minutes, but their system just sits there patiently until an agent is available. The video shows exactly how it works if you're curious. I was ready to write it off as a scam too but was desperate enough to try it.
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Yara Khalil
I have to publicly eat my words about https://claimyr.com - I was the one who called BS on it helping you reach the IRS in 15 minutes. After posting that comment, I was still desperate to resolve my issue so I decided to try it anyway. It doesn't get you through in 15 minutes exactly - what happens is they hold your place in line and call you when an agent is about to be available. In my case it took about 45 minutes total, but I didn't have to actually sit there on hold the whole time which was HUGE. The IRS agent I spoke with was able to confirm that my employer's marketplace premium W-2 needed to be entered as regular income, and she stayed on the line while I entered everything correctly. Issue solved in one call after weeks of trying on my own. Sometimes being wrong feels pretty good!
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Keisha Brown
I'm a little confused by some of the answers here. My employer also provides a separate W-2 for marketplace coverage, but their benefits coordinator told me it wasn't taxable income if it's for health insurance. But you guys are saying it IS taxable?? My regular W-2 is for about $58,000 and the healthcare one is for $5,200. If I have to add that as taxable, I'm gonna owe way more than I planned for! Has anyone actually confirmed this with a tax professional? I'm freaking out a little.
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StormChaser
•Your benefits coordinator is confusing regular employer-provided health insurance (which isn't taxable) with marketplace coverage payments (which ARE taxable). The key difference is that marketplace plans are individual policies, not group plans. When your employer pays for individual marketplace coverage, the IRS treats those payments as additional wages subject to income tax. That's why you received a separate W-2 - it's reporting those payments as taxable compensation. Unfortunately, your benefits coordinator gave you incorrect information, and yes, you will likely owe additional tax on that $5,200.
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Keisha Brown
•Oh no, that's not what I wanted to hear but thank you for explaining the difference. So basically my company is trying to help with health insurance but doing it in a way that creates a tax burden for me. Great. Is there any way to offset this extra tax hit? Like can I deduct any health expenses or premiums I paid myself to help balance things out?
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StormChaser
•You may be able to deduct some medical expenses, but only if you itemize deductions AND your total medical expenses exceed 7.5% of your Adjusted Gross Income. With your income level, that would mean having over $4,700 in out-of-pocket medical expenses before you could start deducting anything. A better option might be to check if you qualify for the Premium Tax Credit, which could offset some of the cost. TurboTax should walk you through this when you enter your 1095-A form from the marketplace. Also, talk to your employer - they might not realize this tax impact and could consider switching to a group health plan which would provide coverage without the tax consequences.
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Paolo Esposito
Ok I'm totally confused now. I have a W-2 from my employer AND a W-2 from the insurance company for the same health plan. Do I need to report both? Seems like double counting the same thing??
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StormChaser
•You shouldn't have a W-2 from an insurance company - W-2s only come from employers. What you might have is a 1095-B or 1095-C from the insurance company, which just reports your health coverage for the year but doesn't represent income. If you actually have two W-2s, check the Employer Identification Numbers (EIN) in Box b on both forms. If they're different, they're from different entities and both need to be reported. If they're reporting the same income twice, that's an error that needs to be corrected. Can you check the form numbers and EINs and report back?
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Connor Rupert
I'm dealing with this exact same situation right now! Got my regular W-2 from my employer plus this separate one for marketplace premiums they paid. Mine shows $3,600 in Box 1 with Social Security and Medicare taxes withheld but no federal income tax. Reading through all these responses has been super helpful - I had no idea this was taxable income until now. My HR department didn't explain any of this when they set up the marketplace coverage for me. I thought they were just being helpful by contributing to my health insurance, but now I realize I'm going to owe taxes on their "help." Has anyone here actually filed their return with both W-2s yet? I'm curious if TurboTax handles this smoothly or if there are any gotchas I should watch out for when entering the marketplace premium W-2. Also wondering if this affects my refund timing since it's technically additional income I wasn't expecting to report. Thanks everyone for sharing your experiences - this thread is way more helpful than the IRS website for understanding this situation!
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