Is health insurance I provide for my household employee taxable?

BY KATHLEEN WEBB

Often families find that the best qualified household employees are requesting some nominal employment benefits. Contributing to or providing a healh insurance policy for the employee is often a tremendous recruitment and retention incentive.

In general, a household employer can provide premium support for the nanny’s individual health insurance on a tax free basis. The insurance premium paid by the employer is not income to the employee and both the employer and employee enjoy these tax advantages.

Beginning in 2014,  individual  health insurance policies will be offered with no medical underwriting and no pre-existing limitations. Individuals who qualify may be eligible for health insurance premium subsidies (federal premium tax credits and cost sharing reductions) when purchasing individual health insurance through a public (State and Federal) Exchange.

Tax rules and regulations surrounding the health insurance industry are in a period of rapid change. HWS encourages employers to seek appropriate professional counsel when establishing health care reimbursement plans and insure that their reimbursement plan remains compliant with current rules and regulations. Some employers may also qualify for tax credits. 

HWS provides this information as a courtesy to help you understand payroll tax changes resulting from the ACA.  This is not be construed as specific tax or legal advice. Guidance relative to the ACA / Obamacare is subject to revision and this may not be the most current information available.


Updated November 26, 2013

Links:

IRS: Small Business Tax Credits for Health Insurance
Zane Benefits: HRAs for Employers with One Employee
Key Facts about the Small Business Health Options Program (SHOP)

 


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