As a result of changes made by the Affordable Care Act, health coverage provided by your employer for your children under 27 years of age is generally tax-free. Effective March 30, 2010, this expanded healthcare tax benefit applies to various workplace and retiree health plans.

These changes allow 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. This rule also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax returns.

You are eligible for the new tax benefit if your children under age 27 are already covered under your employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. The age-27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes. For more details, click here.