Taxation of Employee Benefits: Kentucky
Federal law and guidance on this subject should be reviewed together with this section.
Author: Vicki M. Lambert, The Payroll Advisor
- Kentucky follows federal law regarding the state income taxation of salary deferrals to IRC § 125 cafeteria plans. However, payments made by an employer to a cafeteria plan are wages for unemployment insurance tax purposes. See IRC § 125 Cafeteria Plans.
- Based on the US Supreme Court ruling in Obergefell v. Hodges, the value of health insurance benefits provided to an employee's same-sex spouse are not taxable in Kentucky. However, the value of such benefits provided to an employee's civil union partner or domestic partner are taxable. See Same-Sex Couple Health Insurance Benefits.