Do you need to pay a deductible before insurance pays?
Managed care
In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copayment but offers a deductible and a coinsurance feature. The deductible must be paid in full before any benefits are provided. After the deductible is met, the coinsurance benefits apply. If the PPO plan is an 80% coinsurance plan with a $1,000 deductible, the patient pays 100% of the allowed provider fee up to $1,000. The insurer will pay 80% of the other fees, and the patient will pay the remaining 20%. Charges above the allowed amount are not payable by the patient or insurer but written off as a discount by the physician.
Deductible
An excess can refer to one of two very different insurance terms.
Income taxes in Canada
"Tax payable before credits" is determined using five tax brackets and tax rates. Non-refundable tax credits are then deducted from tax payable before credits for various items such as a basic personal amount, dependents, Canada/Quebec Pension Plan contributions, Employment Insurance premiums, disabilities, tuition and education and medical expenses. These credits are calculated by multiplying the credit amount (e.g., the basic personal amount of $11,038 in 2013) by the lowest tax rate. This mechanism is designed to provide equal benefit to taxpayers regardless of the rate at which they pay tax.
Motorist coverage in Pennsylvania
According to Pennsylvania State law, property expenses resulting from a hit-and-run accident fall under collision or comprehensive coverage. These types of coverage require the insured to pay a deductible.
Self-insurance
In a traditional fully insured health plan, the employer regularly pays a premium, which is a fixed rate for a given time period, and the covered employees pay a monthly contribution to the employer designed to partially offset the employer's premium. In general, the premium does not change except in certain specific instances, such as, most commonly, a change in the number of covered employees. The insurer collects the premiums and pays the health care claims based on the benefits in the health insurance policy that was underwritten and purchased. The employees are responsible to pay any deductibles or co-payments required under the policy.
Nonqualified deferred compensation
In the United States, the question whether any compensation plan is qualified or non-qualified is primarily a question of taxation under the Internal Revenue Code (IRC). Any business prefers to deduct its expenses from its income, which will reduce the income subject to taxation. Expenses which are deductible ("qualified") have satisfied tests required by the IRC. Expenses which do not satisfy those tests ("non-qualified") are not deductible; even though the business has incurred the expense, the amount of that expenditure remains as part of taxable income. In most situations, any business will attempt to satisfy the requirements so that its expenditures are deductible business expenses.
Aviation insurance
The use of the insurance term "hull" to refer to the insured aircraft betrays the origins of aviation insurance in marine insurance. Most hull insurance includes a deductible to discourage small or nuisance claims.
Depreciation
Most income tax systems allow a tax deduction for recovery of the cost of assets used in a business or for the production of income. Such deductions are allowed for individuals and companies. Where the assets are consumed currently, the cost may be deducted currently as an expense or treated as part of cost of goods sold. The cost of assets not currently consumed generally must be deferred and recovered over time, such as through depreciation. Some systems permit full deduction of the cost, at least in part, in the year the assets are acquired. Other systems allow depreciation expense over some life using some depreciation method or percentage. Rules vary highly by country, and may vary within a country based on type of asset or type of taxpayer. Many systems that specify depreciation lives and methods for financial reporting require the same lives and methods be used for tax purposes. Most tax systems provide different rules for real property (buildings, etc.) and personal property (equipment, etc.).
Payroll tax
Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff. Payroll taxes generally fall into two categories: deductions from an employee’s wages, and taxes paid by the employer based on the employee's wages. The first kind are taxes that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG) and often covering advance payment of income tax, social security contributions, and various insurances (e.g., unemployment and disability). The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker. These can consist of fixed charges or be proportionally linked to an employee's pay. The charges paid by the employer usually cover the employer's funding of the social security system, medicare, and other insurance programs. The economic burden of the payroll tax falls almost entirely on the worker, regardless of whether the tax is remitted by the employer or the employee, as the employers’ share of payroll taxes is passed on to employees in the form of lower wages than would otherwise be paid. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital such as higher education.
Cadillac insurance plan
The Patient Protection and Affordable Care Act (PPACA, as amended by the Health Care and Education Reconciliation Act of 2010), imposes an annual 40% excise tax on plans with annual premiums exceeding $10,800 for individuals or $29,500 for a family starting in 2020, to be paid by insurers. The tax was originally set to take effect in 2018. However, in December 2015, a law delayed the start date to 2020. In January 2018, the implementation was postponed until 2022.
Taxation in the United States
The U.S. system allows reduction of taxable income for both business and some nonbusiness expenditures, called deductions. Businesses selling goods reduce gross income directly by the cost of goods sold. In addition, businesses may deduct most types of expenses incurred in the business. Some of these deductions are subject to limitations. For example, only 50% of the amount incurred for any meals or entertainment may be deducted. The amount and timing of deductions for business expenses is determined under the taxpayer's tax accounting method, which may differ from methods used in accounting records.
Income taxes in Canada
Deductions which are not directly linked to non-taxable income exist, which reduce overall taxable income. A key example is RRSP contributions, which is a form of tax-deferred savings account (income tax is paid only at withdrawal, and no interim tax is payable on account earnings).
State income tax
State income tax is imposed at a fixed or graduated rate on taxable income of individuals, corporations, and certain estates and trusts. The rates vary by state. Taxable income conforms closely to federal taxable income in most states, with limited modifications. The states are prohibited from taxing income from federal bonds or other obligations. Most do not tax Social Security benefits or interest income from obligations of that state. Several states require different useful lives and methods be used by businesses in computing the deduction for depreciation. Many states allow a standard deduction or some form of itemized deductions. States allow a variety of tax credits in computing tax.
Flood insurance
Usually, the British insurers require from clients living in "Flood Risk Areas" to flood-proof their homes or face much higher premiums and excesses (American English: deductible).
Internal Revenue Code section 409A
Section 409A generally provides that "non-qualified deferred compensation" must comply with various rules regarding the timing of deferrals and distributions. Under regulations issued by the IRS, Section 409A applies whenever there is a "deferral of compensation," which occurs whenever an employee has a legally binding right during a taxable year to compensation that is or may be payable in a later taxable year. There are various exceptions, excluding from the Section 409A rules compensation that would otherwise fall within this definition, including: qualified plans like the pension and 401(k) plans, and welfare benefits including vacation leave, sick leave, disability pay, or death benefit plan. Other exceptions include those for "short-term deferrals" (i.e. payments made within 2.5 months of the year in which the deferred compensation is no longer subject to a substantial risk of forfeiture), certain stock option and stock appreciation rights and certain separation pay plans.
Mitch Daniels
The plan allows low to moderate income households where the members have no access to employer provided healthcare to apply for coverage. The fee for coverage is calculated using a formula that results in a charge between 2%–5% of a person's income. A $1,100 annual deductible is standard on all policies and allows applicants to qualify for a health savings account. The plan pays a maximum of $300,000 in annual benefits.
Cadillac insurance plan
The tax is not imposed on the total cost of the plan, but on the costs exceeding the aforementioned values, which, after 2020, will adjust to inflation annually. These costs include any part of a person's income allocated to flexible spending accounts, health reimbursement accounts, and health savings accounts, but not expenditures for stand-alone dental, vision, accident, disability, or long-term care insurance coverage. After the December 2015 changes, the tax is now a deductible business expense, reducing the impact on businesses that pay income tax. The tax is intended to do three things: help finance the PPACA; reduce overall health care costs; and address the unequal tax benefit of excluding employer-based health insurance coverage from taxes.
Marital deduction
Marital deduction is a type of tax law that allows a person to give assets to his or her spouse with reduced or no tax imposed upon the transfer. Some marital deduction laws even apply to transfers made postmortem. The right to receive property conveys ownership for tax purposes. A decree of divorce transfers the right to that property by reason of the marriage and is also a transfer within a marriage. It makes no difference whether the property itself or equivalent compensation is transferred before, or after the decree dissolves the marriage. There is no U.S. estate and gift tax on transfers of any amount between spouses, whether during their lifetime or at death. There is an important exceptions for non-citizens. The U.S. federal Estate and gift tax marital deduction is only available if the surviving spouse is a U.S. citizen. For a surviving spouse who is not a U.S. citizen a bequest through a Qualified Domestic Trust defers estate tax until principal is distributed by the trustee, a U.S. citizen or corporation who also withholds the estate tax. Income on principal distributed to the surviving spouse is taxed as individual income. If the surviving spouse becomes a U.S. citizen, principal remaining in a Qualifying Domestic Trust may then be distributed without further tax.
High-deductible health plan
High deductible health plans (HDHPs) have much lower premiums but high deductibles, co insurance and out of pocket maximums. Due to low upfront costs HDHPs are increasing in popularity with employers, with 24% offering some form of HDHP in 2013 (up from 5% in 2007). In this model, the individual assumes all medical costs until the minimum deductible is met. The Affordable Care Act (ACA), passed in 2010, has led to a significant expansion of HDHPs. The proposed replacement of the ACA will continue with expansion of the cost sharing model while reducing the financial subsidies for the out of pocket expenses of low income patients. Specifically, the bill repeals ACA cost-sharing reduction provisions after 2019.
Co-insurance
In health insurance, coinsurance is sometimes used synonymously with copayment, but copayment is fixed while the coinsurance is a percentage that the insurer pays after the insurance policy's deductible is exceeded, up to the policy's stop loss. It can be expressed as a pair of percentages with the insurer's portion stated first, or just a single percentage showing what the insured pays. The percentage due from the insured can range up to 100% (100% meaning the insured pays all costs until reaching the out of pocket maximum). Once the insured's out-of-pocket expenses equal the stop loss the insurer will assume responsibility for 100% of any additional costs. 70–30, 80–20, and 90–10 insurer-insured coinsurance schemes are common, with stop loss limits of $1,000 to $3,000 after which the insurer covers all expenses.
Patient Protection and Affordable Care Act
While health insurance premium costs have moderated, some of this is because of insurance policies that have a higher deductible, co-payments and out-of-pocket maximums that shift costs from insurers to patients. In addition, many employees are choosing to combine a health savings account with higher deductible plans, making the impact of the ACA difficult to determine precisely.
Whole life insurance
The cash value will grow tax-deferred with compounding interest. Even though the growth is considered "tax-deferred," any loans taken from the policy will be tax-free as long as the policy remains in force. In addition, the death benefit remains tax-free (meaning no income tax and no estate tax). As the cash value increases, the death benefit will also increase and this growth is also non-taxable. The only way tax is ever due on the policy is (1) if the premiums were paid with pre-tax dollars, (2) if cash value is "withdrawn" past basis rather than "borrowed," or (3) if the policy is surrendered. Most whole life policies can be surrendered at any time for the cash value amount, and income taxes will usually only be placed on the gains of the cash account that exceeds the total premium outlay. Thus, many are using whole life insurance policies as a retirement funding vehicle rather than for risk management.
Insurance
Gap insurance covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan. Depending on the company's specific policies it might or might not cover the deductible as well. This coverage is marketed for those who put low down payments, have high interest rates on their loans, and those with 60-month or longer terms. Gap insurance is typically offered by a finance company when the vehicle owner purchases their vehicle, but many auto insurance companies offer this coverage to consumers as well.
Flex dollar
In insurance, flex dollars are used to assign values to an employee's benefits. The employee instead of having a deductible or a certain percentage of coverage is assigned a pool of flex dollars to assign as they are required. The obvious advantage to this is the ability to assign a much larger amount of coverage to one area while not being covered in another world.
Disability insurance
Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase policies. Premiums and available benefits for individual coverage vary considerably between companies, occupations, states and countries. In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances thus covering more insurances that the individual was going to purchase. Web-based disability insurance calculators assist in determining the disability insurance needed.
High-deductible health plan
To qualify for an HDHP, an individual plan must have a deductible of at least $1,350 and family plans must have a deductible of at least $2,700. An HDHP's total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can't be more than $6,650 for an individual or $13,300 for a family (This limit doesn't apply to out-of-network services). Because of the relatively high cost of HDHPs, the increased out-of-pocket costs can be burdensome especially for low income families. As a way to try and offset the cost of care, HDHP policy holders may contribute to a health savings account (HSA) with pre-tax income. HSA contributions, unlike other tax-advantaged investment vehicles, offer a triple tax benefit – tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. The maximum contribution limits policy holders may make to their HSA in 2018 are $3,450 (individual) and $6,900 (family) with a $1,000 catch-up contribution for people age 55 or older.
Accounts receivable
Outstanding advances are part of accounts receivable if a company gets an order from its customers with payment terms agreed upon in advance. Since billing is done to claim the advances several times, this area of collectible is not reflected in accounts receivables. Ideally, since advance payment occurs within a mutually agreed-upon term, it is the responsibility of the accounts department to periodically take out the statement showing advance collectible and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a letter of credit or by Trade Credit Insurance.
Medicare (United States)
Part B coverage begins once a patient meets his or her deductible ($183 for 2017), then typically Medicare covers 80% of the RUC-set rate for approved services, while the remaining 20% is the responsibility of the patient, either directly or indirectly by private group retiree or Medigap insurance.
Health insurance in the United States
Disability income (DI) insurance pays benefits to individuals who become unable to work because of injury or illness. DI insurance replaces income lost while the policyholder is unable to work during a period of disability (in contrast to medical expense insurance, which pays for the cost of medical care). For most working age adults, the risk of disability is greater than the risk of premature death, and the resulting reduction in lifetime earnings can be significant. Private disability insurance is sold on both a group and an individual basis. Policies may be designed to cover long-term disabilities (LTD coverage) or short-term disabilities (STD coverage). Business owners can also purchase disability overhead insurance to cover the overhead expenses of their business while they are unable to work.
Damage waiver
Some credit card issuers (Visa, MasterCard, etc.,) offer insurance for theft or damage to rented cars. A few of the cards (noted in the table below) offer "primary" insurance, so the driver does not need to file a claim with his or her personal insurance. More cards offer "secondary insurance." This means that if the renter has personal or business vehicle insurance with appropriate coverage, then that insurance will pay first. Then the credit card issuer will pay the primary insurance's deductible and will address any large claims above the primary insurance limit.
Earthquake insurance
Most earthquake insurance policies feature a high deductible, which makes this type of insurance useful if the entire home is destroyed, but not useful if the home is merely damaged. Rates depend on location and the probability of an earthquake loss. Rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick.
Nonqualified deferred compensation
Often, the employee already has income above the wage base ($127,200 in 2017) for purpose of the Old Age, Survivors, Disability Insurance (OASDI) portion of the FICA tax, and won't owe the OASDI portion of the tax. However, the deferred compensation will be still subject to the hospital insurance portion of the FICA tax (referred to as the "HI" portion, or "Medicare tax") because the hospital insurance wage base is currently unlimited. The employee portion of the Medicare tax is 1.45% of wages (and an extra 0.9% for high-earners).
Vehicle insurance
To reduce the insurance premium, the insured party may offer to pay a higher excess (deductible) than the compulsory excess demanded by the insurance company. The voluntary excess is the extra amount, over and above the compulsory excess, that is agreed to be paid in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by the insurer, the insurer is able to offer a significantly lower premium.
Health savings account
The premium for a high-deductible health plan is generally less than the premium for traditional health insurance. A higher deductible lowers the premium because the insurance company no longer pays for routine healthcare, and insurance underwriters believe that Americans who see a relationship between medical cost and their bank accounts will consume less medical care, shop for lower-cost options, and be more vigilant against excess and fraud in the health care industry. Introducing consumer-driven supply and demand and controlling inflation in health care and health insurance were among the government's goals in establishing these plans.
Life insurance
Premiums are not usually deductible against income tax or corporation tax, however qualifying policies issued prior to 14 March 1984 do still attract LAPR (Life Assurance Premium Relief) at 15% (with the net premium being collected from the policyholder).
Corporate-owned life insurance
Interest incurred on indebtedness has historically been deductible, (although the deduction of "personal" interest was largely eliminated in 1986), and in the 1950s a type of "leveraged insurance" transaction began being marketed that permitted an insurance owner to in effect deduct the cost of paying for insurance by (1) paying large premiums to create cash values, (2) "borrowing" against the cash value to in effect strip out the large premiums, and (3) paying deductible "interest" back to the insurer, which was in turn credited to the policy's cash value as tax-deferred earnings on the policy that could fund the insurer's legitimate charges against policy value for cost of insurance, etc.
Income tax in the United States
Employers get a deduction for amounts contributed to a qualified employee retirement plan or benefit plan. The employee does not recognize income with respect to the plan until he or she receives a distribution from the plan. The plan itself is organized as a trust and is considered a separate entity. For the plan to qualify for tax exemption, and for the employer to get a deduction, the plan must meet minimum participation, vesting, funding, and operational standards.
International Life Assurance Society
Under any reserve methodology for life insurance policies, the actuarial liability under the policy is equal to the present value of the amounts expected to be paid on account of the policy, offset by the present value of the amounts expected to be received from the policyholder via future premium payments. The amounts expected to be paid by the company include not just the contracted benefits themselves, but also the expenses that will be incurred in servicing the policy, as well as any dividends that will be paid to the policyholder in future years. The entire calculation is intended to quantify the amount of assets that need to be held "in reserve" for payment of those future benefits, expenses and dividends. Under the "net premium" variation used by Wright, there is no explicit estimate of future expenses and dividends. Instead, the first portion of the calculation (i.e., the present value of amounts expected to be paid by the company) reflects only the contracted benefits, and does not reflect any expenses or dividends that are also expected to be paid. This "error" is corrected in the second portion of the calculation, wherein the offset portion of the calculation uses a theoretical "net" premium that is typically much lower than the premium actually being paid by the policyholder. By offsetting a smaller amount for the present value of the expected future premiums, the future expenses and dividends are taken into account, albeit in an indirect manner.
John C. Goodman
Today's tax law places rigid restrictions on how HSAs can be used. For example, there must be an across-the-board deductible, covering all medical expenses. However, Goodman now argues that we should have accounts with no deductibles or copayments. For example, employees could be given an account from which to manage all primary care. Diabetics and patients with other chronic conditions could manage their own budgets along with incentives to manage their own care.
Medical billing
The insurance payment is further reduced if the patient has a copay, deductible, or a coinsurance. If the patient in the previous example had a $5.00 copay, the physician would be paid $45.00 by the insurance company. The physician is then responsible for collecting the out-of-pocket expense from the patient. If the patient had a $500.00 deductible, the contracted amount of $50.00 would not be paid by the insurance company. Instead, this amount would be the patient's responsibility to pay, and subsequent charges would also be the patient's responsibility, until his expenses totaled $500.00. At that point, the deductible is met, and the insurance would issue payment for future services.
Taxable income
Some systems allow tax deductions for certain nonbusiness expenses (sometimes called personal or domestic expenses). Such outlays may include personal expenses, such as a home mortgage interest deduction, and vary widely by jurisdiction. In addition, many systems only levy taxes on earnings above an income tax threshold, allow deductions for personal allowances or a minimum deemed amount of personal deductions. The United States federal tax system allows a deduction for personal exemptions, as well as a minimum standard deduction in lieu of other personal deductions. Some states in the United States allow few personal deductions.
Decennial liability
Decennial liability insurance or "Inherent Defect Insurance" is insurance that is taken out (by the contractor or principal) to cover costs associated with the potential collapse of the building after completion. The names derives from the fact that it covers the 10 year period after completion of the project. It is compulsory to insure in a few countries such as France, and Egypt. In other countries like Qatar there is the form of strict liability arising from the French Civil Code which does not require any proof of fault, but there is no compulsory requirement to insure The cost of the insurance can significantly increase construction costs and may be up to 1.5% of structural value (including the Technical Inspections that the insurers mandate).
Self-insurance
Health plans that cover dependents as well as employees collect contributions for dependents from the employee's payroll deductions. Similar to in traditional insurance, the plan sponsor determines the cost of health coverage and generally requires different payroll deductions depending on whether an employee elects self-only coverage, self plus spouse, self plus spouse plus child(ren), or certain other permutations as determined by the plan sponsor.
Petplan
Petplan offers a range coverage, from $2,500 to unlimited annual coverage per year. Policyholders select an annual or per-condition deductible, which gets deducted from reimbursement after the co-pay has been applied, and also choose a reimbursement percentage once the deductible is met.
Vehicle insurance in the United States
Uninsured/Underinsured coverage, also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, the insurance company pays the insured medical bills, then would subrogate from the at fault party. This coverage is often overlooked and very important. In Colorado, for example, it was estimated in 2009 that 15% of drivers were uninsured. 
Usually the limits match the liability limits. Some insurance companies do offer UM/UIM in an umbrella policy.
Employee compensation in the United States
Deferred comp is only available to senior management and other highly compensated employees of companies. Although DC isn't restricted to public companies, there must be a serious risk that a key employee could leave for a competitor and deferred comp is a "sweetener" to try to entice them to stay. If a company is closely held (i.e. owned by a family, or a small group of related people), the IRS will look much more closely at the potential risk to the company. A top producing salesman for a pharmaceutical company could easily find work at a number of good competitors. A parent who jointly owns a business with their children is highly unlikely to leave to go to a competitor. There must be a "substantial risk of forfeiture," or a strong possibility that the employee might leave, for the plan to be tax-deferred. Among other things, the IRS may want to see an independent (unrelated) Board of Directors' evaluation of the arrangement.Plans are usually put in place either at the request of executives or as an incentive by the Board of Directors. They're drafted by lawyers, recorded in the Board minutes with parameters defined. There's a doctrine called constructive receipt, which means an executive can't have control of the investment choices or the option to receive the money whenever he wants. If he's allowed to do either of those 2 things or both, he often has to pay taxes on it right away. For example: if an executive says "With my deferred comp money, buy 1,000 shares of Microsoft stock" that's usually too specific to be allowed. If he says "Put 25% of my money in large cap stocks" that's a much broader parameter.
GAP insurance
GAP insurance covers the amount on a loan that is the difference between the amount owed and the amount covered by another insurance policy. Some GAP policies also cover the deductible. This coverage is marketed for low down payment loans, high interest rate loans and loans with 60 month or longer terms. GAP insurance is typically offered by a finance company at time of purchase. Most auto insurance companies offer this coverage to consumers. GAP insurance is usually paid upfront and, for that reason, one is eligible for a refund if he/she sells or refinances their vehicle.
401(k)
Prior to EGTRRA, the maximum tax-deductible contribution to a 401(k) plan was 15% of eligible pay (reduced by the amount of salary deferrals). Without EGTRRA, an incorporated business person taking $100,000 in salary would have been limited in Y2004 to a maximum contribution of $15,000. EGTRRA raised the deductible limit to 25% of eligible pay without reduction for salary deferrals. Therefore, that same businessperson in Y2008 can make an "elective deferral" of $15,500 plus a profit sharing contribution of $25,000 (i.e. 25%), and—if this person is over age 50—make a catch-up contribution of $5,000 for a total of $45,500. For those eligible to make "catch-up" contribution, and with salary of $122,000 or higher, the maximum possible total contribution in 2008 would be $51,000. To take advantage of these higher contributions, many vendors now offer Solo 401(k) plans or Individual(k) plans, which can be administered as a Self-Directed 401(k), permitting investment in real estate, mortgage notes, tax liens, private companies, and virtually any other investment.
Deductible
In an insurance policy, the deductible is the amount paid
out of pocket by the policy holder before an insurance provider will pay any expenses. In general usage, the term "deductible" may be used to describe one of several types of clauses that are used by insurance companies as a threshold for policy payments.
Moral hazard
Sometimes moral hazard is so severe it makes insurance policies impossible. Coinsurance, co-payments, and deductibles reduce the risk of moral hazard by increasing the out-of-pocket spending of consumers, which decreases their incentive to consume. Thus, the insured have a financial incentive to avoid making a claim.
Vehicle insurance in the United States
Collision coverage provides coverage for vehicles involved in collisions. Collision coverage is subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable or totaled. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until the car is paid off. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) is the term used by rental car companies for collision coverage.
Tax deduction
Often, deductions are subject to conditions, such as being allowed only for expenses incurred that produce current benefits. Capitalization of items producing future benefit can be required, though with some exceptions. A deduction is allowed, for example, on interest paid on student loans. Some systems allow taxpayer deductions for items the influential parties want to encourage as purchases.
Flexible spending account
There are FSA plans for non-employer sponsored premium reimbursement and parking and transit expense reimbursement. The individual premium account allows an employee to pay for his or her spouse's insurance with pre-tax dollars as long as the other coverage is a non-employer-sponsored, is considered an individual plan, and is directly billed to the member or the member's spouse. A parking and transit account allows employees to pay parking or public transit expenses with pre-tax dollars up to certain limits. Though not as common as the FSAs listed above, some employers have offered adoption assistance through an FSA.
Also, one cannot have a health care FSA if he or she has a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA). In cases where an employee has a HDHP with a HSA, they are eligible for a Limited Expense FSA (LEX) (also called Limited Purpose FSA). These FSAs may be used to reimburse dental and vision expenses, regardless of any plan deductible; at the employer's discretion, eligible medical expenses incurred after the deductible is met may also be reimbursable.
Expense account
To increase an expense account, it must be debited. To decrease an expense account, it must be credited. The normal expense account balance is a debit. In order to understand why expenses are debited, it is relevant to note the accounting equation, Assets = Liabilities + Equity. Expenses show up under the equity portion of the equation because equity is common stock plus retained earnings and retained earnings are revenues minus expenses minus dividends. Expenses are considered temporary accounts in this equation, because at the end of the period, expense accounts are closed. Because expense accounts decrease the credit balance of owner’s equity, expenses must be debited.
Disposable and discretionary income
For the purposes of calculating the amount of income subject to garnishments, United States' federal law defines disposable income as an individual's compensation (including salary, overtime, bonuses, commission, and paid leave) after the deduction of health insurance premiums and any amounts required to be deducted by law. Amounts required to be deducted by law include federal, state, and local taxes, state unemployment and disability taxes, social security taxes, and other garnishments or levies, but does not include such deductions as voluntary retirement contributions and transportation deductions. Those deductions would be made only after calculating the amount of the garnishment or levy. The definition of disposable income varies for the purpose of state and local garnishments and levies.
Charitable contribution deductions in the United States
To illustrate, suppose that the donor has an adjusted gross income of $100,000. In the year 2004, he gives $60,000 in cash to the American Cancer Society. The donor may deduct "only" $50,000 in 2004. Why? Because anything over that amount is in excess of 50% of his adjusted gross income (100,000 adjusted gross income × 50% = 50,000). The remaining $10,000 (60,000 total donation − 50,000 deducted in 2004 = 10,000) carries forward to 2005, at which point he may deduct it.
Deductible
There are also deductible reimbursement programs that reimburse a deductible in the event of an automobile, home, boat/yacht or health insurance claim.
Health insurance
Employers and employees may have some choice in the details of plans, including health savings accounts, deductible, and coinsurance. As of 2015, a trend has emerged for employers to offer high-deductible plans, called consumer-driven healthcare plans which place more costs on employees; some employers will offer multiple plans to their employees.
Taxation in Iceland
Income tax is deducted at the source, which is called pay-as-you-earn (PAYE). Each employee has a personal tax credit of 53,895 ISK per month (2018) which is deducted from calculated taxes. Unused credit may be transferred to one's spouse. Mandatory employee pension insurance is 4% of gross income (employer provides a minimum of 8%) and another 4% of total income may be deducted for private pension insurance (if so, the employer is obliged to pay additional 2% premium for the benefit of the eployees) .
Flat tax
Since a central tenet of the flat tax is to minimize the compartmentalization of incomes into myriad special or sheltered cases, a vexing problem is deciding when income occurs. This is demonstrated by the taxation of interest income and stock dividends. The shareholders own the company and so the company's profits belong to them. If a company is taxed on its profits, then the funds paid out as dividends have already been taxed. It's a debatable question if they should subsequently be treated as income to the shareholders and thus subject to further tax. A similar issue arises in deciding if interest paid on loans should be deductible from the taxable income since that interest is in-turn taxed as income to the loan provider. There is no universally agreed answer to what is fair. For example, in the United States, dividends are not deductible but mortgage interest is deductible. "Thus a Flat Tax proposal is not fully defined until it differentiates new untaxed income from a pass-through of already taxed income."
Standard deduction
Under United States tax law, the standard deduction is a dollar amount that non-itemizers may subtract from their income before income tax is applied. Taxpayers may choose either itemized deductions or the standard deduction, but usually choose whichever results in the lesser amount of tax payable. The standard deduction is available to US citizens and aliens who are resident for tax purposes and who are individuals, married persons, and heads of household. The standard deduction is based on filing status and typically increases each year. It is not available to nonresident aliens residing in the United States (with few exceptions, for example, students from India on F1 visa status can use the standard deduction). Additional amounts are available for persons who are blind and/or are at least 65 years of age.
401(k)
Generally, a 401k participant may begin to withdraw money from his or her plan after reaching the age of 59 without penalty. The Internal Revenue Code imposes severe restrictions on withdrawals of tax-deferred or Roth contributions while a person remains in service with the company and is under the age of 59. Any withdrawal that is permitted before the age of 59 is subject to an excise tax equal to ten percent of the amount distributed (on top of the ordinary income tax that has to be paid), including withdrawals to pay expenses due to a hardship, except to the extent the distribution does not exceed the amount allowable as a deduction under Internal Revenue Code section 213 to the employee for amounts paid during the taxable year for medical care (determined without regard to whether the employee itemizes deductions for such taxable year). Amounts withdrawn are subject to ordinary income taxes to the participant.
Income tax in the United States
Most personal, living, and family expenses are not deductible. Business deductions allowed for Federal income tax are almost always allowed in determining state income tax. Only some states, however, allow itemized deductions for individuals. Some states also limit deductions by corporations for investment related expenses. Many states allow different amounts for depreciation deductions. State limitations on deductions may differ significantly from Federal limitations.
Deductible
Given the nature of medical treatment, the insured often faces multiple medical expenses spread over several days for a single illness or injury. Due to this reason, health insurance deductibles often tend to be imposed on a term basis (e.g. annually) as opposed to a per-visit threshold. In spite of this, major medical insurance policies may have a per-visit excess which often does not cover the cost of routine visits to a GP, unless it is certified to be a part of a continuous treatment (and the bills can be collated in a single claim).
Long-term care insurance
Most policies have an elimination period or waiting period similar to a deductible. This is the period of time that you pay for care before your benefits are paid. Elimination days may be from 30 to 120 days after a long-term care incident, such as a fall or illness. Some policies require intended claimants to provide proof of 30 to 120 service days of paid care before any benefits will be paid. In some cases, the option may be available to select zero elimination days when covered services are provided in the home in accordance with a Plan of Care.
Damage waiver
Damage waivers are not necessarily complete. They may have deductibles (also called excess) and limits on the amount covered. Liability coverage always has limits.
Deductible
A deductible should not be confused with a franchise. Where a deductible represents a part of the expense for which the insurer is not liable, the franchise is a pure threshold that, when exceeded, transfers liability for the "entire" expense to the insurer. For example, with a franchise of $20,000, a claim of $19,900 is borne entirely by the policy holder and a claim of $20,500 is borne entirely by the insurer.
Massachusetts health care reform
By comparison, Commonwealth Care insurance had either zero or $250 deductibles (depending on which of three types of Commonwealth Care insurance it was) and zero or very low co-pays as compared to the PPACA-consistent insurance (not illustrated in the table). "Not applicable" in the table above means the subscriber (a) cannot go out of network at all or (b) can go out of network but will be responsible for all charges incurred; it does not mean the deductible does not apply. Both Commonwealth Care and PPACA-consistent insurance is networked and almost all versions of both insurances offered gym memberships.
Federal Insurance Contributions Act tax
In 2004, the Center on Budget and Policy Priorities stated that three-quarters of taxpayers pay more in payroll taxes than they do in income taxes. The FICA tax is considered a regressive tax on income with no standard deduction or personal exemption deduction. The Social Security portion of the tax is imposed on the first $117,000 in 2014, $118,500 in 2015 and 2016, $127,200 in 2017, and $128,400 in 2018. The FICA tax is not imposed on investment income such as rental income, interest, or dividends.
Auto insurance risk selection
When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to affect the expected cost of future claims. Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).
Vehicle insurance
When the premium is not mandated by the government, it is usually derived from the calculations of an actuary, based on statistical data. The premium can vary depending on many factors that are believed to affect the expected cost of future claims. Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).
Health care finance in the United States
Deductibles have been rising much faster than premiums in recent years. For example, deductibles rose 12% in 2016, four times faster than premiums. From 2011 to 2016, deductibles rose 63% for single coverage, versus 19% for single coverage premiums. During that time, worker earnings rose 11%. The average annual deductible is around $1,500. For employers with fewer than 200 employees, 65% of employees are now in "high-deductible plans" which averaged $2,000.
Affordable Care Act tax provisions
Individuals who were not insured during the tax year are required to make a payment when filing their tax return, unless they qualify for a tax exemption. An exemption certificate number is required in some cases for obtaining an exemption on a tax return. In 2014 the payment amount was 1% of income or $95 per adult ($47.50 per child) limited to a family maximum of $285 (national average premium for a bronze plan), whichever is greater. In 2015 the penalty increased to $285 per adult or 2% of income above the limit.
High-deductible health plan
The proposed American Health Care Act of 2017 could result in higher deductibles (or total out-of-pocket cost) to consumers and leave 23 million Americans without insurance, according to the Congressional Budget Office. The Trump Administration is proposing to nearly double the maximum HSA contribution for a family from $6,750 to $13,100 annually. An increase in HSA contribution limits will provide little benefit to the low-income households, which already find HDHPs to be less affordable in the event of a catastrophic illness. One method to entice consumers to pursue HDHPs is low- or no-cost wellness benefits, which provides the insured with better access to preventive care visits and tools at lower cost. If successful, these plans may support the ongoing shift from curative to preventive health care.
Progressivity in United States income tax
A taxpayer with $40,000 of wage income may only have the "standard" deductions available to him, whereas a taxpayer with $200,000 of wage income might easily have $50,000 or more of "itemized" deductions. Allowable itemized deductions include payments to doctors, premiums for medical insurance, prescription drugs and insulin expenses, state taxes paid, property taxes, and charitable contributions. In those two scenarios, assuming no other income, the tax calculations would be as follows for a single taxpayer with no dependents in 2006:
Individual retirement account
If the contribution to the IRA was nondeductible or the IRA owner chose not to claim a deduction for the contribution, distributions of those nondeductible amounts are tax and penalty free.
Captive insurance
Captives may be licensed to write some lines of business directly. In other cases, such as workers' compensation in the U.S., for example, the business must initially be written by another insurer, under its insurance licence, which then reinsures it (lays it off) to the captive. The original insurer retains a fee, usually somewhere between 5% and 15%, to provide this service. 
Premiums paid to captives are tax deductible, provided the terms of the policy (including the premium amount) are reasonable. A captive cannot arbitrarily set the premium amount simply to generate a deduction for the parent. In most situations, the captive carrier should be able to demonstrate its premium generating process (underwriting).
Schedular system of taxation
Gains and losses on loans, derivatives, financial instruments and intangibles are taxed as well as income. The basic rule for calculating Case III profits is to follow the accounts, although there are detailed anti-avoidance rules to stop the most obvious abuses. Only direct expenses, such as costs incurred in obtaining a loan, are deductible in the Case III computation. If the result is negative, Case III profits are taken as nil, with the negative result being treated as non-trading debits. Similar calculation rules apply to loans, derivatives, financial instruments and intangibles that are taxed under Case I (although losses are treated as a Case I expense rather than non-trading debits).
Political positions of Donald Trump
Trump has cited the rising costs of premiums and deductibles as a motivation to repeal the Affordable Care Act. However, according to a study by the Kaiser Family Foundation, the after-subsidy premium costs to those with insurance coverage via the Affordable Care Act's exchanges did not change significantly on average from 2016 to 2017, as increases in the subsidies offset pre-subsidy insurance premium increases. For example, after-subsidy costs for a popular "silver plan" remained around $200/month in 2016 and 2017. An estimated 70% of persons on the exchanges could purchase a plan for $75/month after subsidies. Further, in the employer market, health insurance premium cost increases from 2015-2016 were an estimated 3% on average, low by historical standards. While deductibles rose 12% on average from 2015-2016, more workers are pairing higher-deductible plans with tax-preferred health savings accounts (HSAs), offsetting some of the deductible increase (i.e., lowering their effective deductible).
Income tax in the United States
The amount and timing of deductions for income tax purposes is determined under tax rules, not accounting ones. Tax rules are based on principles similar in many ways to accounting rules, but there are significant differences. Deductions for most meals and entertainment costs are limited to 50% of the costs. Costs of starting a business (sometimes called pre-operating costs) are deductible ratably over 60 months. Deductions for lobbying and political expenses are limited. Some other limitations apply.
Perpetual insurance
Perpetual insurance is a type of homeowners insurance policy written to have no term, or date, when the policy expires. From the effective start date, the coverage exists for perpetuity. The insured deposits money, called a deposit premium, with the insurer for insurance for the life of the risk. The deposit is many times larger than the cost of a non-refundable, annual premium for an equivalent policy with a one-year term. The insurer must earn enough income from investing the deposits to cover losses and operating expenses for the model to be economically viable. Upon cancellation, the insured is entitled to a full refund of the initial deposit premium, usually without interest. Perpetual insurance, first issued in the U.S. in Philadelphia in 1752, is still used for fire and homeowner's insurance.
Tax deduction
Tax deduction is a reduction of income that is able to be taxed and is commonly a result of expenses, particularly those incurred to produce additional income. The difference between deductions, exemptions and credit is that deductions and exemptions both reduce taxable income, while credits reduce tax.
Third-party administrator
This term is also now commonly used in commercial general liability (CGL) policies or so called "casualty" business. In these instances, the liability policies are written with a large (in excess of $50,000) self-insured retention (SIR) that operates somewhat like a deductible, but rather than being paid at the end of a claim (when a loss payment is made to a claimant), the money is paid up front by the insured for costs, expenses, attorney fees etc. as the claim moves forward. If there is a settlement or verdict within the SIR, then that is also paid by the insured up to the limit of the SIR, before the insurer steps in and pays its portion. The TPA acts like a claims adjuster for the insurance company and sometimes works in conjunction with the inside insurance company claims adjuster or an outside claims investigator as well as the defense counsel. The defense counsel in some situations is selected by the TPA. The point is that the larger the SIR, the more responsibility the TPA has over the control of the way the claim is handled and ultimately resolved. Some self-insured retentions are in the millions of dollars and the TPAs are large multinational non-insurance entities that handle all the claims. In contrast, some self-insureds choose not to outsource claims handling to a TPA, preferring instead to handle all claims in house. This is known as self-administration.
Marine insurance
A deductible is the first amount of a claim that the policy holders bears themselves. There can occasionally be a zero deductible but in most cases a deductible applies to claims made under a policy of marine insurance.
Employee compensation in the United States
In a deferred comp plan, unlike an ERISA (such as a 401(k)plan), the company doesn't get to deduct the taxes in the year the contribution is made, they deduct them the year the contribution becomes non-forfeitable. For example, if ABC company allows SVP John Smith to defer $200,000 of his compensation in 1990, which he will have the right to withdraw for the first time in the year 2000, ABC puts the money away for John in 1990, John pays taxes on it in 2000. If John keeps working there after 2000, it doesn't matter because he was allowed to receive it (or "constructively received") the money in 2000.
Vehicle insurance in the United States
One common misconception in the United States is that vehicles that are financed on credit through a bank or credit union are required to have "full" coverage in order for the financial institution to cover their losses in case of an accident. Insurance requirements vary between financial institutions and each state. Minimum deductibles and liability limits (required by some leasing companies) would be outlined in the loan contract. Failure to carry the required coverages may lead to the lienholder purchasing insurance and adding the cost to the monthly payments or repossession of the vehicle. Vehicles purchased with cash or paid off by the owner are generally required to only carry liability. In some cases, vehicles financed through a "buy-here-pay-here" car dealership—in which the consumer (generally those with poor credit) finances a car and pays the dealer directly without a bank—may require comprehensive and collision depending on the amount owed for the vehicle.
Debit card
Traditionally, FSAs (the oldest of these accounts) were accessed only through claims for reimbursement after incurring, and often paying, an out-of-pocket expense; this often happens after the funds have already been deducted from the employee's paycheck. (FSAs are usually funded by payroll deduction.) The only method permitted by the Internal Revenue Service (IRS) to avoid this "double-dipping" for medical FSAs and HRAs is through accurate and auditable reporting on the tax return. Statements on the debit card that say "for medical uses only" are invalid for several reasons: (1) The merchant and issuing banks have no way of quickly determining whether the entire purchase qualifies for the customer's type of tax benefit; (2) the customer also has no quick way of knowing; often has mixed purchases by necessity or convenience; and can easily make mistakes; (3) extra contractual clauses between the customer and issuing bank would cross-over into the payment processing standards, creating additional confusion (for example if a customer was penalized for accidentally purchasing a non-qualifying item, it would undercut the potential savings advantages of the account). Therefore, using the card exclusively for qualifying purchases may be convenient for the customer, but it has nothing to do with how the card can actually be used. If the bank rejects a transaction, for instance, because it is not at a recognized drug store, then it would be causing harm and confusion to the cardholder. In the United States, not all medical service or supply stores are capable of providing the correct information so an FSA debit card issuer can honor every transaction-if rejected or documentation is not deemed enough to satisfy regulations, cardholders may have to send in forms manually.
Payroll tax
In the United States, payroll taxes are assessed by the federal government, some of the fifty states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have state income tax; New Hampshire and Tennessee only tax income from interest and dividends), the District of Columbia, and numerous cities. These taxes are imposed on employers and employees and on various compensation bases and are collected and paid to the taxing jurisdiction by the employers. Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers. The Federal Insurance Contributions Act tax is a federal payroll tax imposed on both employees and employers to fund Social Security and Medicare —federal programs that provide benefits for retirees, the disabled, and children of deceased workers.
Federal, state, and local withholding taxes are required in those jurisdictions imposing an income tax. Employers having contact with the jurisdiction must withhold the tax from wages paid to their employees in those jurisdictions. Computation of the amount of tax to withhold is performed by the employer based on representations by the employee regarding his/her tax status on IRS Form W-4.
Transgender rights in the United States
IRS Publication 502 lists medical expenses that are tax-deductible to the extent they 1) exceed 7.5% of the individual's adjusted gross income, and 2) were not paid for by any insurance or other third party. For example, a person with $20,000 gross adjusted income can deduct all medical expenses "after" the first $1,500 spent. If that person incurred $16,000 in medical expenses during the tax year, then $14,500 is deductible. At higher incomes where the 7.5% floor becomes substantial, the deductible amount is often less than the standard deduction, in which case it is not cost-effective to claim.
Corporate tax
Most jurisdictions allow a tax deduction for interest expense incurred by a corporation in carrying out its trading activities. Where such interest is paid to related parties, such deduction may be limited. Without such limitation, owners could structure financing of the corporation in a manner that would provide for a tax deduction for much of the profits, potentially without changing the tax on shareholders. For example, assume a corporation earns profits of 100 before interest expense and would normally distribute 50 to shareholders. If the corporation is structured so that deductible interest of 50 is payable to the shareholders, it will cut its tax to half the amount due if it merely paid a dividend.
Deductible
Deductibles are normally provided as clauses in an insurance policy that dictate how much of an insurance-covered expense is borne by the policyholder. They are normally quoted as a fixed quantity and are a part of most policies covering losses to the policy holder. The insurer then becomes liable for claimable expenses that exceed this amount (subject to the maximum sum claimable indicated in the contract). Depending on the policy, the deductible may apply per covered incident, or per year. For policies where incidents are not easy to delimit (health insurance, for example), the deductible is typically applied per year.
Health care finance in the United States
An estimated 178 million persons under 65 obtain their insurance through their employer. Firms are often "self-insured", meaning they reimburse the insurance companies that pay the medical claims on behalf of their employees. Employers may use a stop-loss, meaning they pay the insurance company a premium to cover very expensive individual claims (e.g., the firm is self-insured up to a threshold for individual workers). Workers pay a share of their costs to their employers for coverage, basically a premium deducted from their paychecks. Workers also have deductibles and out-of-pocket costs. The structure of the insurance plan may also include a Health savings account or HSA, which enable workers to save money tax-free for health expenses.
Predicted effects of the FairTax
Like the home mortgage interest deduction, charitable giving receives preferential treatment under current tax law allowing individuals to deduct the donation, to certain charities, from taxable income. Someone paying a 25% income tax rate would receive $250 back from the government for a $1,000 donation. While there is no deduction for payroll taxes and most do not itemize the deduction for full benefit, this encourages households to donate more of their income to charity than would otherwise be the case. As the FairTax would only tax new retail purchases, donations to charity would be made with untaxed income (comparable to a deduction on both income and payroll taxes). The FairTax would also remove the prohibition of political speech by non-profits, therefore removing the threat to non-profit status. Taxable property and services purchased by a qualified non-profit or religious organization 'for business purposes' would not be taxable.
Liability insurance
Liability insurance is designed to offer specific protection against third-party insurance claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability are not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defence normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defence costs tend to soar when cases go to trial. In many cases, the defense portion of the policy is actually more valuable than the insurance, as in complicated cases, the cost of defending the case might be more than the amount being claimed, especially in so-called "nuisance" cases where the insured must be defended even though no liability is ever brought to trial.
American Health Care Act of 2017
There are many variables that affect premiums, deductibles, and out-of-pocket amounts, including (among others) age and health of plan participants, availability of subsidies, funding for high-risk pools, required insurance coverage elements, lifetime limits, maximum ratio of prices charged to older persons versus younger, and the quality of insurance offered. Regarding quality, the "actuarial value" is an estimate of the percentage of total cost that a particular insurance plan is expected to cover. CBO reported that:The current law (ACA) established two taxes on high-income individuals (defined as income over $200,000 for individuals or $250,000 for couples, roughly the top 6% of earners), via a 0.9% Medicare payroll surtax on earnings over that threshold and a 3.8% tax on net investment income. The latter tax is steeply progressive, with the top 1% paying 90% of the tax, as investment income is highly concentrated with the wealthy. The ACA also established a penalty tax (related to the individual mandate) for individuals without adequate insurance, an excise tax on employers with 50 or more workers who offer insufficient coverage, annual fees on health insurance providers, and the "Cadillac tax" (yet to be implemented as of 2017) on generous employer-sponsored health plans. Combined with subsidies that primarily benefit low-income households, the law significantly reduced income inequality after taxes and transfers.
Pet insurance
Pet insurance companies are beginning to offer the pet owner more of an ability to customize their coverage by allowing them to choose their own level of deductible or co-insurance. This allows the pet owner to control their monthly premium and choose the level of coverage that suits them the best.
Deferred compensation
In an ERISA-qualified plan (like a 401(k) plan), the company's contribution to the plan is deductible to the plan as soon as it is made, but not taxable to the participants until it is withdrawn. So if a company puts $1,000,000 into a 401(k) plan for employees, it writes off $1,000,000 that year. If the company is in the 25% bracket, the NET contribution is $750,000 (because they didn't pay $250,000 in taxes - 25% of $1M). Why? Because the cash flow is still $1M to the Plan to be withdrawn later by the employees - then when tax returns are filed, since the taxable profit is $1M "less", there is an on paper "savings" at the 25% tax rate. In a non-qualified deferred comp plan, the company doesn't get to deduct the taxes in the year the contribution is made, they deduct them the year the contribution becomes non-forfeit-able. For example, if ABC company allows SVP John Smith to defer $200,000 of his compensation in 1990, which he will have the right to withdraw for the first time in the year 2000, ABC puts the money away for John in 1990, John pays taxes on it in 2000. If John keeps working there after 2000, it doesn't matter because he was allowed to receive it (or "constructively received") the money in 2000.
Expense
Even if something qualifies as an expense, it is not necessarily deductible. As a general rule, expenses are deductible if they relate to a taxpayer’s trade or business activity or if the expense is paid or incurred in the production or collection of income from an activity that does not rise to the level of a trade or business (investment activity).
Pay-as-you-earn tax
Canada requires tax deduction at source on payments of compensation by employers. The deduction is required for Federal and provincial income taxes, Canada Pension Plan contributions, and Employment Insurance.
Income protection insurance
Premiums paid by employers to provide cover for their employees are tax-deductible as a business expense and are a taxable benefit to the employee. Benefit payments paid from the policy, following an accident or illness affecting the policyholder, are free of income tax and National Insurance contributions for individual policies. For group policies, benefits are paid as taxable and NIable earnings.
Tax-deductible loss
According to the United States Internal Revenue Code certain losses are deductible for tax purposes. To qualify, the loss must not be compensated by insurance and it must be sustained during the taxable year. If the loss is a casualty or theft of the personal, family, or living property of the taxpayer, the loss must result from an event that is identifiable, damaging, and sudden, unexpected, and unusual in nature. Examples are hurricanes, tornadoes, and floods. A house that suffers from termite damage would not generally qualify because it is considered to be gradual and progressive. The loss is reduced by a $100 per event and the total loss might be reduced by the 10% of adjusted gross income floor.