Tax Deductions

[buzzfly]

On the flight crew website, a deduction is listed for loss of license/medical insurance. Can you deduct your health insurance? Seems like a stretch.

 

[Michael Knight]

ah... no.

 

[dixieflyer]

Can anyone here confirm the legality of writing off Loss of Licence and Loss of Medical Insurance? I haven thought of that one. Can you write it off at 100% Or is it only a partial write off?

Thanks in Advance

 

[Snoopy58]

dixie,

If you are able to do that (and I'm not claiming that it's allowed), it seems that then, should you go out on LOL, then your insurance benefits would be taxable where they otherwise wouldn't be.

We had such a discussion at my airline recently; the current plan is that LOL benefits (which come from the company -- it self-insures for pilots' Loss of License) are taxed as income. There was an option out there to transform the program into one which paid the benefits out tax-free, but the COST (to us) of such a program was that, even though we wouldn't be paying premiums (just as we don't now), the value of the premiums would be treated as "imputed income" to us, since the company would be in effect giving us the value of such (theoretical) premiums. Thus, we'd ALL pay higher monthly income taxes under the "tax-free LOL proposal" than we do now. Some sharp people looked at the numbers closely, and the proposal was voted down.

The relevant point being, if your LOL benefits come to you tax-free, then the premiums paid for them will be paid from post-tax income (our proposed plan, and your current situation, it sounds like). It would seem logical that if you deduct your LOL insurance premiums, then the benefits, should you get them, would be taxable income (which is more or less our current situation -- the insurance is part of our compensation, and the notional "premium payments" aren't something we pay, nor pay tax on). Depending on your financial state, that might not be something you'd want to do. You may need all the LOL payments your insurance gives you if you go out on Loss of License.

Or it might be something you would like to do. *IF* such a move would be allowable for you. Our program is clearly different from yours, and I'm not giving you tax advice! Just food for thought.

Snoopy

 

[dixieflyer]

Snoopy,

Thanks for the insight. Your correct, our LOL benefit programs are different. As an ALPA member we recieved a certain amount of LOL benefits. I have been paying about $70 a month for "extra" coverage, should I lose my medical. This extra coverage includes both lump sum and monthly payments. I guesse what I was wondering was could I write off the $70 a month in extra insurance. Any thoughts?

Thanks in Advance

 

[Snoopy58]

dixieflyer,

If you go out on LOL, would you pay taxes on the payments you receive from the coverage?

If the answer is yes you would, then I'd aggressively pursue the issue & see if there is a way that you can write off the extra premiums, because it doesn't make intuitive sense that you'd pay premiums post-tax & then have to pay tax on the benefits as well.

If the answer is no you wouldn't, then my suspicion would be that you can't / shouldn't try to write off the extra premiums, because I doubt the IRS would let you pay pre-tax $ for premiums that go toward a tax-free insurance payment.

That was the basic tradeoff at my airline, albeit with different program details: you must pay tax on benefits OR on the (money you use to pay the) preumiums, but not both.

Again, I'm not giving tax advice, and what "seems to make sense" is certainly no guide to the tax code. But if I were in your shoes, that's the reasoning I'd use as far as how much energy I'd put into further researching the issue, getting second opinions, etc.

Cheers,

Snoopy