How do I Calculate the Fair Market Value of Health Care?

With blended families becoming the norm, many employers are choosing to insure non-tax dependents as an added benefit to their employees. Non-tax dependents include domestic partners, children of domestic partners and adult children of the employee who reach age 27 during the calendar year of coverage. Employers must calculate the Fair Market Value of the health care provided and report it as income on the employees W-2 to comply with Internal Revenue Service regulations.

Instructions

• 1

  Subtract the monthly heath insurance premium paid by the employee for single coverage from the total monthly insurance premium for the single employee to get the monthly employer contribution. For example, $500 total monthly premium - $100 employee contribution = $400 monthly employer insurance contribution.

• 2

  Subtract the total monthly health insurance premium paid by the employee for coverage for a couple from the total monthly insurance premium for the couple to get the monthly employer contribution. For example, $1000 total monthly premium - $200 employee contribution = $800 monthly employer insurance contribution for the couple.

• 3

  Subtract the monthly employer contribution for the single employee from the monthly employer contribution for the couple to get monthly value of the insurance paid on the non-employee half of the couple. For example, $800 - $400 = $400 monthly cost for second half of couple.

• 4

  Multiply the monthly cost for the non-employed half of the couple by 12 months to get the annual fair market value of the health care coverage for the non-employee half of the couple. For example, $400 x 12 months = $4800 fair market value of health care coverage.