Taxation of Domestic Partner Benefits: The Hidden Costs

40 Pages Posted: 7 Apr 2011

See all articles by Patricia A. Cain

Patricia A. Cain

Santa Clara University - School of Law

Date Written: April 5, 2011

Abstract

Many employers provide domestic partner benefits to their employees, especially in the form of health care plans. Domestic partners are not considered spouses under the Internal Revenue Code. Nor, of course, are same-sex spouses so long as DOMA is in effect. Many employers assume that this means all domestic partner (or same-sex spouse) benefits are taxable under the federal tax law. But this is not true. A partner (or same-sex spouse) can qualify as a dependent and benefits paid to dependents are also tax-exempt. A person can qualify as a dependent for purposes of excluding the value of health care plans from income even if the person cannot be claimed as a dependent on the employee taxpayer’s return. This essay describes the applicable rules in some detail. It also provides a survey of colleges and universities that provide such benefits and analyzes how many of such employers are applying the wrong tax law to their employees.

Keywords: Domestic Partner Benefits, same-sex couples, DOMA, taxation of health plans, employee benefits

Suggested Citation

Cain, Patricia A., Taxation of Domestic Partner Benefits: The Hidden Costs (April 5, 2011). University of San Francisco Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1803582

Patricia A. Cain (Contact Author)

Santa Clara University - School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

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