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