345 / What are domestic partner benefits and how are they taxed?
After July 13, 2013, same-sex couples who were married in a state in which same sex marriage is recognized (the state of “celebration”) are considered spouses, regardless of where they live.1 Under current law, same sex marriage is now recognized in all 50 states.
Employers may offer a range of domestic partnership benefits, such as family, bereavement, sick leave, and relocation benefits. In general, most people mean employer-provided health insurance coverage when they speak of domestic partnership benefits.
An employee is taxed on the value of employer-provided health benefits for his or her domestic partner unless the domestic partner qualifies as the employee’s dependent under IRC Section 151. The tax is determined by assessing the fair market value of the coverage provided to the domestic partner. This amount then is reported on the employee’s W-2 form and is subjected to Social Security (FICA) and federal income tax withholding.