8791 / Is the value of employer-provided coverage under accident or health insurance taxable income to an employee when the coverage is provided for the employee’s spouse, children or dependents?

Employer-provided accident and health coverage for an employee and the employee’s spouse and dependents, both before and after retirement, and for the employee’s surviving spouse and dependents after the employee’s death, does not have to be included in gross income by the active or retired employee or, after the employee’s death, by the employee’s survivors.¹In 2010, the Affordable Care Act (“ACA”), expanded the exclusion from gross income for amounts expended on medical care to include employer-provided health coverage for any adult child of the taxpayer if the adult child has not attained the age of 27 as of the end of the taxable year. The IRS has released guidance indicating that the exclusion applies regardless of whether the adult child is eligible to be claimed as a dependent for tax purposes.²

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1. Rev. Rul. 82-196, 1982 CB 53; GCM 38917 (11-17-82).

2. IRC § 105(b), as amended by the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010. Notice 2010-38, 20100 IRB 682.

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