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Pet Insurance

I just have first pet insurance deduction through payroll. Is it qualify to tax exempt like medical insurance or not?



  • Unless something has change, this is a non-qualified deduction that is not tax exempt. IRS has a publication (502?) which lists all Tax Exempt deductions. It is more written from the tax preparer's point of view, but legally it is all the same tax code. If you cannot find it that publication, it cannot be qualified as exempt in a Section 125 plan. In fact there are a few things by code that are qualified per publication 502 but expressly limited under Section 125.

  • Not the question, but basically for any deduction to be qualified (non-taxable), the recipient must be qualified (generally employee, spouse, certain children, not pets or other relatives), the nature of the expense must be qualified (publication 502?), and any plan requirements must be meet (could be expensive for say 401(k), or just a company policy for transportation ... see publication 15B).

  • agree with david and you would have to be able to make it part of your pretax Section 125 benefits. I've not heard where it can be pre-tax..... but do know some companies have it as a post-tax deduction....

  • Again, not the question, but there is some advantage to having certain benefits paid for with post tax dollars. Generally any benefit that provides income to someone. If you pay for these with pre-tax dollars, you just made the benefit taxable. There is a lot of advantage to all parties if income payments are non-taxable. This includes term life insurance in excess of the IRS qualification limit of $50K.

    Also, while there can be post-tax Section 125 items, any item outside Section 125 (and 401(k)) are automatically post-tax, so there is some advantage to keeping them outside Section 125 (no upside to including it).