skip to Main Content

Domestic Partner Taxation Complexities

Knowledge Center / Blog

Domestic Partner Taxation Complexities

By The Employer Group - Jul 18, 2023

Employer-sponsored benefit plans are complex for any company to administer. Adding domestic partner coverage provides additional layers of complexity. Not only do certain criteria need to be met in order to be classified as domestic partnership (per benefit vendor as well as per state), but specific tax implications also arise when a qualified domestic partner is added to an employee’s benefit plan.

Perhaps one of the biggest challenges employers face when offering domestic partner coverage is taxation of domestic partner coverage. The IRS allows employee benefit premiums to be deducted on a pre-tax basis for coverage for themselves, their spouse, and dependent children, but excludes domestic partners from pre-tax eligibility. Therefore, the portion of the premium for domestic partner coverage is considered part of the employee’s taxable income. In addition, if the employer pays for a portion of the domestic partner’s monthly premium, this portion is taxable as well and must be reported as imputed income on the employee’s W-2.

Working with qualified HR & Payroll professionals such as the team at The Employer Group can help navigate these complexities and ensure payroll taxes are being calculated and paid correctly – contact us to see how we can assist with your HR needs!



This information does not constitute legal advice.

Back To Top