What’s the difference between tax-free and tax-advantaged?
- Tax-free—This reimbursement is 100 percent tax-free. The amount won’t be included in your income or taxed on your paycheck.
- Tax-advantaged—This reimbursement is free of payroll taxes (like Medicare and Social Security), but will be included as gross income on your W-2.
How do I know if an expense is tax-free or tax-advantaged?
For a reimbursement to be tax-free, the individual (you or your eligible family member) who incurred the expense needs to be covered by a major medical policy that provides minimum essential coverage at the time of the expense (What is Minimum Essential Coverage).
For example, let’s say your spouse went to the eye doctor in June. If they had a major medical policy that covered them in June, then your reimbursement for that eye exam would be 100 percent tax-free. If they did not have coverage in June, your reimbursement would be tax-advantaged. Note: If the individual was covered by a policy providing MEC for part of a month, you would answer “yes” to having MEC for that month.
What if I need to edit a medical policy or answered wrong by accident?
If you answered this question incorrectly or your coverage has changed, it could affect an expense you’ve already submitted. You can correct that by taking the following steps:
Note: If your coverage has changed and you’re being reimbursed for that policy through PeopleKeep, be sure to also update your policy with PeopleKeep.
Step 1: Click your name in the top right and select “Tax savings” from the drop-down.
Step 2: Select the benefit year and family member you’re editing coverage for.
Step 3: Select the calendar month.
Step 4: Change your coverage and hit “Save.”