WISCONSIN SIMPLIFIES TAX LAW FOR HEALTH INSURANCE BENEFITS FOR ADULT CHILDREN

November 11, 2011

Wisconsin has amended state tax code to simplify Wisconsin's income tax treatment of employer-provided health insurance benefits for adult children. Previously, employers were required to add the fair market value of the health insurance benefit to the parent's income for state tax purposes if certain non-dependent adult children were covered by an employer’s plan.

Effective March 30, 2010, federal tax law was changed as part of health care reform legislation and employers were no longer required to add the fair market value for health insurance benefits to the employee's income for federal tax purposes; however, until now, Wisconsin tax law previously did not conform to the federal definition. 

The change to Wisconsin tax law is effective retroactive to January 1, 2011. Employers no longer need to add the fair market value for health insurance benefits to an employee's income as long as a child has not turned 27 by the end of the tax year. Also, when 2011 W-2s are prepared, employers should not include any income for the children’s health insurance benefit provided during 2011. Employees will get a credit on their state income tax return for taxes already withheld in 2011.