On December 22, 2017, The Tax Cuts and Jobs Act was signed into law. The information in this article predates the tax reform legislation and may not apply to tax returns starting in the 2018 tax year. You may wish to speak to your tax advisor about the latest tax law. This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
Health coverage provided for an employee’s children under 27 years of age is generally tax-free to the employee.
Child – Broad Definition for this Purpose Other than age, the “child” definition has no other restriction. Thus, there are no income or marital restrictions. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. |
This provision allows employers with cafeteria plans – plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits – to permit employees to make pre-tax contributions to pay for this expanded benefit.
The definition of “child” for this purpose includes the individual’s:
- child,
- stepchild,
- legally-adopted individual,
- an individual lawfully placed with the employee for legal adoption, and
- an eligible foster child.
No other requirements apply so long as the individual meets the definition of a child and has not reached age 27 by the last day of the year. Even a married child is included by this definition! (But the married child’s spouse and/or children are not covered.) A child attains age 27 on the 27th anniversary of the date the child was born (for example, a child born on April 10, 1989 attained age 27 on April 10, 2016).
Contact your employer for further information regarding the employer’s plan related to this very beneficial provision.