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Merlo
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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Hi - I live in Connecticut with my girlfriend. We have lived

Resolved Question:

Hi -
I live in Connecticut with my girlfriend. We have lived together in the same house for the last 4 years. She is mainly dependent on me for her livelihood. She has recently lost her insurance and I was looking to add her to my work insurance as a domestic partner. My company supports this but I don't know the tax implications. I some cases, it appears I could claim her as a dependent and other's finding seem to think not. She currently makes about 1200 a month.

Thanks for your help.

Walt Vannoy
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello Walt,

 

You would not be able to claim your girlfriend as a dependent unless her own income is $3,650 or less for the year.

 

If an employer covers an employee's domestic partner, whatever it pays for the partner is added to the employee's wages and becomes taxable, unless the partner is the employee's tax dependent

 

 

Thank you Walt

 

 

Customer: replied 4 years ago.
Hi -

Can you check this link.

http://www.hrc.org/issues/workplace/benefits/domestic_partner_tax_dependent.htm#_edn1

It seems to imply that there is way to avoid the "Gross Income Test"

Expert:  Merlo replied 4 years ago.

Hello again Walt,

 

In order for an individual who is not a relative (including domestic partners) of the employee to qualify as a dependent for income tax purposes, all of the following tests must be met:

  • Gross income is less than the exemption amount ($3,650 for 2009).
  • The individual has the same principal place of abode as the employee and is a member of the employee's household.
  • The employee provides over one/half of the individual's support for the year.
  • The individual is a citizen or national of the United States or is a resident of the United States or a country contiguous to the United States.
  • The individual has not filed a joint return with his or her spouse.

However, for purposes of the exclusion for employer-provided health insurance, the individual does not have to meet the requirement that gross income is less than the exemption amount.

 

Accordingly, an individual who is not a relative may still qualify as a dependent for purposes of the exclusion if the individual meets all of the above requirements except that the individual's gross income is equal to or more than the exemption amount. (Notice 2004-79, Internal Revenue Service)

 

So if the domestic partner qualifies as a dependent for purposes of the employer-provided health insurance exclusion, the value of employer-provided health insurance coverage for the domestic partner is excluded from the employee's income.

 

Keep in mind that all of the other rules except for the gross income test must still be met, which means that you must provide for more than half of your partner's total support. If you can satisfy that rule as well as all of the other rules except for the gross income test, then even though you cannot claim her as a dependent for income tax purposes, you could add her to your health coverage and not have to pay tax on the value of those benefits.

 

 

Thank you Walt

 

 

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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Merlo
Merlo
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25+ years tax consulting. Specializing in returns for US citizens living abroad