Are you wondering if you will be taxed for the new Legal Services Plan benefit and if so, how much you will be taxed? Under the old Legal Services Plan benefit, some members believed that they were taxed $75 to $80 per year for that benefit. That was NOT correct. Instead the cost of the Plan (about $75 to $80 per member per year) was added to your income and you were required to pay taxes on that. That meant that for most people, the actual tax was between $12 and $20.
The new Plan is expected to cost approximately $28 to $38 per member per year. You will be required to pay taxes on that amount which means that your tax may be anywhere from a few dollars to $10 depending on your own actual tax bracket.
Prior to 1992, legal services benefits were exempt from taxes so this benefit was provided without members being required to pay taxes on it. In 1992, this exemption was eliminated by Congress.