Health Care Benefits for Domestic Partners

by Beverly A. Pekala on July 11, 2011

Health Care Benefits for Domestic Partners Legislation was introduced in Washington that would provide the same tax benefits for domestic partners as for a married couple when it comes to the issue of taxing health insurance benefits. The legislation would apply to partners in an Illinois civil union and to civil union partners in other states.

Health care benefits are not taxed as income to married couples, but those same benefits are considered income for tax purposes when provided to domestic partners or partners in a civil union. Therefore, civil union partners are taxed on health insurance benefits while spouses are not taxed at all. According to one study, domestic partners pay an additional $1,700 per year due to the federal taxation on these health care benefits.

Microsoft, AT&T and 75 other companies and trade associations have sent the legislature a letter supporting the bill. Many companies permit employees to add domestic partners or civil union partners to their health-care plans, but agree that there are tax disadvantages to both the domestic partner and the company, since the company ends up paying more in payroll taxes to provide the health insurance to domestic partners or civil union partners than to spouses.

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