There are important tax consequences to be aware of when you are covering your domestic partner.
The difference in cost between a single health insurance policy and the category that you are moving to with a domestic partner (either Employee/Spouse or Family policy) may not be paid with pre-tax dollars, unless your partner qualifies as a tax dependent (as defined below).
Additionally, if your domestic partner does not qualify as your tax dependent, under federal tax law the portion of the premiums the university pays for the coverage of your domestic partner will be included in your gross income, subject to federal income tax withholding and employment taxes, and will be reported on your Form W-2. You will also be unable to claim expenses for the domestic partner under the Health Spending Account plan.
If your domestic partner qualifies as your tax dependent, then no portion of the premiums paid by the university will be included in your income or be subject to federal withholding or employment taxes.
- Who is a tax Dependent? Your same-sex or opposite-sex domestic partner (other than a spouse) can qualify as your tax dependent under Internal Revenue Code Section 152(a), only if:
- for the entire calendar year in question, he or she lives with you as a member of the household you maintain and occupy, and
- during the calendar year in question you provide more than half of his or her total support.
Note that it is not necessary for you to be able to claim an exemption for your domestic partner on your Form 1040. If your tax year is other than the calendar year, use that year instead.
We will also consider your domestic partner to be a tax dependent if he or she meets the above requirements for the first portion of the year, then you marry, and he or she remains your legal spouse the remainder of the year. Please see Qualifying Person Test under Publication 503 on the IRS web site.
- Determining Support. To determine whether you provide more than half of your domestic partner’s total support, you must compare the amount of support you provide with the amount of support your domestic partner receives from all sources, including social security, welfare payments, the support you provide and the support your domestic partner supplies for himself or herself. Support includes food, shelter, clothing, medical and dental care, education, and the like. If you believe you might provide more than half of your partner’s support, you should use the support worksheet in IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information).
- Filing a Declaration of Dependent Domestic Partner (other than a spouse). Please contact your tax advisor before filing an affidavit that your domestic partner is a dependent, as defined by the Internal Revenue Code.
If your domestic partner qualifies as your tax dependent, you can avoid having the premiums paid by the university treated as taxable income. To avoid taxation, you must complete and return the Declaration of Domestic Partnership form. Because the determination of whether a person is a dependent for tax purposes turns on facts solely within your knowledge, The University of Iowa cannot make this determination for you. If the university does not receive a properly completed declaration form from you, we will assume that your domestic partner does not qualify as your tax dependent.