Partner’s insurance produces big tax bill

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Dear Tax Talk,

I added my boyfriend to my medical plan at work as a domestic partner. Although the same amount is deducted from my paycheck, the 76 percent my company pays for the medical coverage is added on as income to me, amounting to $5,000 per year. We both file separate tax returns and want to know if either of us can claim this as a deduction? We appreciate your reply.


Nancy


Dear Nancy,
Although many companies provide
domestic partner benefits, a domestic partner is not the same as a spouse when it comes to the taxation of these benefits. Generally, an employer does not have to include the value of a heath insurance plan in an employee’s wages. The exclusion applies to health insurance plans that cover the employee, their spouse and dependents. The exclusion also applies for former employees including widows of the former employee. However, unless your partner is your dependent, the exclusion would not apply to the cost of the benefits provided for him.

Since your benefits are taxable, it’s the same as if you paid them with after tax money. The cost of health insurance is considered a
medical expense that your boyfriend can claim on Schedule A.

If your boyfriend is self-employed, he can not claim the insurance as an adjustment to gross income on Form 1040, self-employed health insurance deduction, since it does not meet the criteria. In order to claim a self-employed health insurance deduction the health plan has to be established under that business, which is not the case in this situation.

To my readers: I appreciate all the questions you send each week. But because of the volume, you may not have the answer you need with the filing deadline just a few days away. If you haven’t heard back from me and you really need an answer before you can file, check out the full
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