Can Medical Ins Premiums be used ?

[RWG1950]

New customer MFJ, is retired and had a long career working for the state of WI. He had accumulated significant unused sick time.
When he retired, these unused sick days converted into about a $100-K pool of money that the state uses to pay his $9-K yearly medical Ins.
He doesn't itemize Federal deductions but his prior preparer has been using the $9-K as a premium subtraction on his WI return.
I had thought paying such premiums from any tax deferred type of account (the unused sick time pool of money sounds pre-tax to me) prevented deducting
otherwise allowable medical premiums - i.e. double dipping. Are such premiums paid by a retiree sick leave account allowable as Federal deductions,
Thanks for comments.

[kathyc2]

No, and it doesn't appear they are deductible for WI either. https://www.revenue.wi.gov/Pages/FAQ...s.aspx#medins1

[TaxGuyBill]

If the person was still working and was sick, they would have used a sick day and then paid tax on that amount that they received, right?

Based on that, it seems logical to me that he should be PAYING tax on the amount the he receives. But maybe I'm missing something. Is he paying taxes on the $9,000 per year? Or did he pay taxes on the $100,000 when he left work?

*IF* he has been PAYING tax on those payments he receives, then yes, the cost is a medical deduction.

[kathyc2]

If the person was still working and was sick, they would have used a sick day and then paid tax on that amount that they received, right?

Based on that, it seems logical to me that he should be PAYING tax on the amount the he receives. But maybe I'm missing something. Is he paying taxes on the $9,000 per year? Or did he pay taxes on the $100,000 when he left work?

*IF* he has been PAYING tax on those payments he receives, then yes, the cost is a medical deduction.

There's all kinds of things that don't appear to make sense on the surface when it comes to state and local gov't retirement benefits. In this case they turn their unused sick pay to credits for insurance. Then they can no longer be eligible for cash payment of sick leave. They need to stay on employer group insurance and it is not taxable the same as the premiums would be pre-tax during working years.

[FEDUKE404]

This is a truly weird scenario. Are you saying a retiree can receive "sick pay" after leaving employment?
I think I would first need to see the relevant W2 and/or Form 1099R documents.

For retiring government employees in this state, they are paid (via W2) at separation a maximum number of days for unused annual leave. There is no monetary compensation for unused sick leave, although the number of days of same can be added to the total number of "working years" thus indirectly receiving more retirement pay due to the multiplier calculations.

Review of the link above (!!) would seem to indicate NO (reduced) taxable income and NO allowable medical insurance deduction for the premiums. I have no knowledge of "option to receive cash in lieu" issues.

It will be interesting to follow this thread. . .

[RWG1950]

Per my taxpayer, the sick days are a negotiated employee benefit. Sick days used while employed, simply become part of the employees regular pay.
Any unused sick days accumulate over time. Employees with unused sick days at retirement can use the dollar value of them to pay for retiree med ins.
Employee has no cash-out option of accumulated sick days at retirement. Any unused balance at death is forfeited.

[kathyc2]

It will be interesting to follow this thread. . .

https://etf.wi.gov/retirement/saving-retirement/accumulated-sick-leave-credit-program

[New York Enrolled Agent]

IRC section 213 contains:

(a)Allowance of deduction

There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent ...

[FEDUKE404]

https://etf.wi.gov/retirement/saving-retirement/accumulated-sick-leave-credit-program

Strange things can occur in Madison and environs. . .
Not sure how that would fly in this state. Government retiree-only basic medical coverage is FREE. Kinda negates article excerpt "This program can be very helpful because when you retire you will pay more for health insurance. While you are working, you pay less because your employer pays most of your premium." So adding at the time of retirement more years to the "service" pot from unused sick days at least gives you a perpetual monetary benefit increase.
One would think the Form 1099-R reporting for the WI income might be of interest?
Now, if someone could figure out some "assistance" for IRMAA and NIIT, then I would pay attention!

[terryats]

lots of speculation going on. RWG 1950 the answer to your question is NO cannot be used for Wi. didn't anyone check WI dept. of revenue site.

"May I use the value of unused sick leave applied to the cost of my medical care insurance for the subtraction?

1. No. If you did not have the option to receive cash in lieu of applying unused sick leave to your medical care insurance premiums, the value of this unused sick leave is not included in your income and you may not claim a subtraction for the amount applied to the cost of the medical care insurance."

As Bill said about using on federal as a deductible medical expense your client must have been taxed on the sick leave or no deduction.

[kathyc2]

lots of speculation going on. RWG 1950 the answer to your question is NO cannot be used for Wi. didn't anyone check WI dept. of revenue site.

Ummmm, I posted the link that says not available for WI days ago.