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President Bush's Healthcare Reform Proposal

By Kelly Montgomery, About.com

Updated: January 25, 2007

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How is the healthcare tax deduction going to work?

The President proposes that all families with health insurance be able to claim a tax deduction on the first $15,000 of income. Individuals will get a $7,500 deduction. This deduction applies to everyone who has private insurance (NOT Medicare, Medicaid, or some other governmental program), regardless of whether they get it through their job or on their own from an insurance company.

The big catch to this is that all job-based coverage will be counted as taxable income. This means that if you get your insurance through your job, the cost of that insurance - both your contribution and your employer's - will be added to your total taxable income. This will be a change for most people who get their coverage through work.

Those who do have or buy insurance on their own will be big winners under this program, as they will receive the full tax deduction without any increase to their income.

Read on for an example of how the deduction might affect you.

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