Health Insurance for Adult Children up to Age 27
Effective January 1, 2010, Wisconsin law requires health insurers to provide coverage for an adult child of the insured. The child must be:
- Over 17 but less than 27 years of age.
- Not eligible for coverage under a group health benefit plan that is offered by the child's employer and for which the amount of the child's premium contribution is no greater than the premium amount for his or her coverage as a dependent.
There may be a tax effect when health insurance coverage is provided to an adult child. The value of employee health insurance paid for by an employer, including coverage for spouses and dependents, is excluded from the employee's gross income. Therefore, employer-provided health insurance for an adult child of an employee is only excludable from the employee's gross income if the adult child qualifies under federal law as a dependent of the employee.
To qualify as a dependent on your federal income tax return, your child must be either your "qualifying child" or "qualifying relative."
Generally, to be a "qualifying child," your child must:
- Be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student, or (c) any age if permanently and totally disabled.
- Have lived with you for more than half of the year.
- Not have provided more than half of his or her own support for the year.
If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to the exemption.
To be a "qualifying relative," an individual must be:
- A child, brother, sister, stepbrother, or stepsister; the father or mother, or an ancestor of either; a stepfather or stepmother; a son or daughter of a brother or sister of the taxpayer; a brother or sister of the father or mother of the taxpayer; a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in law, or sister-in-law; an individual (other than the spouse) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household,
- An individual for whom the taxpayer provides over one-half of the individual's support for the calendar year,
- An individual who is not your qualifying child or the qualifying child of any other taxpayer, and
- An individual whose gross income is less than the exemption amount ($3,650 for 2010).
For purposes of health insurance coverage only, an adult child may meet the definition of a "qualifying relative" even though the adult child's gross income may equal or exceed the exemption amount.
If the adult child does not qualify as a dependent, the fair market value of the adult child's health insurance coverage is income and taxable wages to the employee.
The fair market value of the adult child's health coverage is determined by the employer and insurance provider. Contact your employer for further information. The Department of Revenue cannot determine the fair market value of the coverage.
The requirement to include the fair market value of employer-provided health insurance benefits for nondependent adult children under the age of 27 in the employee's gross income applies for Wisconsin tax purposes for taxable years beginning in 2010 and thereafter. For federal tax purposes, the fair market value of employer-provided health insurance for nondependent adult children under the age of 27 at the end of 2010 is required to be included in the employee's gross income for the period January 1, 2010, through March 29, 2010. (Note: For information on the effect of the federal Affordable Care Act (enacted March 30, 2010) on employer-provided health care benefits, see www.revenue.wi.gov/taxpro/news/100727.html.)
Last updated July 30, 2010