The domestic partner health insurance tax refers to the fact that the tax treatment of employer-sponsored health insurance isn’t the same for domestic partners as it is for spouses, it is not an actual tax imposed on domestic partnerships. One of the benefits of employer-sponsored health insurance is that the premiums are typically paid on a pre-tax basis for the employee, their spouse, and their tax dependents. The portion of the premiums the employee pays is deducted from their paycheck before taxes are calculated, and the portion that the employer pays is not considered taxable compensation for the employee.[efn_note]”Key Elements of the U.S. Tax System” Tax Policy Center; Urban Institute and Brookings Institution. Accessed June 4, 2024[/efn_note] But the rules are different for domestic partner health insurance (unless your domestic partner is your tax dependent, which is possible only if their income is very low and they meet other IRS requirements).[efn_note]”Claiming a Domestic Partner as a Dependent” Intuit Turbotax. Mar. 28, 2024[/efn_note] Assuming your domestic partner cannot be claimed as your tax dependent, their coverage under your employer-sponsored health plan cannot be provided on a pre-tax basis. Instead, the fair market value of their health benefits is counted as taxable income for the employee.[efn_note]”Considerations for Domestic Partner Coverage in Employee Benefits” EPIC Insurance Brokers & Consultants. Sep. 30, 2022[/efn_note] The tax treatment of domestic partner health insurance is an important consideration to keep in mind when deciding whether to add your domestic partner to your employer’s health plan. The fact that the value of the coverage will be added to your taxable income might mean that it makes more sense for your partner to obtain their health coverage elsewhere. (To clarify, the portion that’s payroll deducted will not be paid with after-tax dollars and the portion that the employer pays – if any – will be subject to income tax and FICA tax.)[efn_note]”Considerations for Domestic Partner Coverage in Employee Benefits” EPIC Insurance Brokers & Consultants. Sep. 30, 2022[/efn_note] The specifics will depend on your tax bracket, the fair market value of the domestic partner's health insurance, and the other coverage alternatives available to your partner. You should consult a tax advisor or other trusted professional if you have questions or want guidance on your specific circumstances.