Cash in Lieu of Health Benefits Is Taxable

Employer payments for your health coverage are fully tax free. This rule does not change in 2014 when the health care mandates go into effect. But are cash payments that an employer pays to an employee instead of providing coverage also tax free?

The IRS reminds employees that cash payments, for whatever reason, are taxable wages. This is so even if the cash is meant to replace employer-paid health coverage. Next year, “large” employers must offer minimum essential health coverage or pay a penalty. This responsibility has no impact on cash payments made to their employees.

Source: ECC 201319015