Taxing Domestic Partner's Health Insurance Coverage

Sometime around 1995, my employer's health insurance provider announced coverage for domestic partners.  Companies that wanted to provide this benefit needed to add a rider to their policy and ensure those claiming to be domestic partners actually were.  In our case, that meant filling out some forms and then paying a registration fee to the city clerk's office.  An additional payroll deduction later, and my partner was covered.

The next paycheck I noticed something odd in the numbers: the amount deducted for taxes went up.  I asked about this and learned that it wasn't a clerical error.  While my portion of the health insurance coverage wasn't taxed, my partner's was.  This isn't the case with married couples, but as I was helpfully reminded, we weren't married.

Fast-forward 16 years to now.  I'm again working with my new employer to go through the silly hoops needed to ensure my partner is covered.  But this time a moment of Internet procrastination led to an interesting article published in the New York Times.  The article mentions that a tax exception may exist for cases when the domestic partner meets the definition of a dependent (roughly, that one partner receives 50% or more support from the other partner).  And as that happens to be our current situation, I asked my company's H.R. department about it.

This was the first time the H.R. folks had heard of this, which the article says isn't uncommon as the exception is specifically limited to health care benefits.  Based on their research, they couldn't find any reason to deny this exception to us, so they drafted an affidavit for us to sign stating my partner met the IRS definition for dependent.  They also warned that in the case the IRS ultimately rejected this, we would be retroactively taxed.

Obviously, our situation doesn't apply to every same-sex couple.  And even when it does, there may be other health insurance options that make better sense.  The larger point here is that it pays to question assumptions and dive into the details.  Eventually, consistent legal recognition of gay marriages will make this and many other inequalities a non-issue.  But we aren't there yet.