For purposes of employer-sponsored group health coverage, if an individual does not meet the Federal tax definition of a dependent, then the value of one single employee rate would be includable in the employee’s income for Federal tax purposes.
An individual is treated as a dependent for Federal tax purposes if he or she meets the definition of either 1) a qualifying child or 2) a qualifying relative.
Who is a Qualifying Child? A qualifying child for purposes of Section 152(c) of the Internal Revenue Code (Code) must meet the following criteria:
The individual:
1. Is the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or stepsibling, or a descendant of one of these;
2. Resides for over 50% of the taxable year with the taxpayer;
3. Is either:
• Under the age of 19 by the end of the calendar year;
• A full-time student who has not attained age 24 by the close of the calendar year; or
• Permanently disabled, without regard to age.
4. Did not provide more than 50% of his/her own support for the year;
5. Must not have filed a joint return (other than for a claim of refund) with his/her spouse for the year;
6. Must be younger than the taxpayer claiming the child as a qualifying child; and
7. Is claimed as a qualifying child on parent’s tax return, or if not, is claimed on another taxpayer’s tax return as a qualifying child, but only if that taxpayer has a higher adjusted gross income than any parent.
Who is a Qualifying Relative? A qualifying relative for purposes of Section 152(d) of the Code must meet the following criteria:
1. The individual is a relative of the taxpayer or, other than a spouse, someone who has the same principal place of abode and is a member of the taxpayer’s household;
2. The taxpayer provides more than 50% of the individual’s total support for the year; and
3. The individual is not a qualifying child of another taxpayer.