Health care tax fix signed into law
Governor Beshear signed HB 255 (Simpson) into law this week, a positive sign for business owners and workers. This Chamber-supported bill provides a state tax exclusion for health insurance premiums pursuant to the new federal health care law.
Under the new health care law, employers providing health insurance are required to expand that coverage to an employee’s adult children under the age of 27. As a companion to that requirement, the law amends the federal tax code to exclude the premium paid for the expanded coverage from an employee’s gross income, just as all other employer-provided health benefits are considered tax-free. However, because Kentucky’s tax code does not automatically update when the federal code is amended, Kentucky employers would have had to include the cost or value of these new benefits in the employee’s Kentucky income and withhold state taxes on the value of these benefits. HB 255 fixes this problem by bringing Kentucky’s tax code in line with the federal code pursuant to the new health care law, alleviating both an administrative nightmare for Kentucky employers and lowering the taxable wage base for Kentucky workers.