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Taxation of Employee Benefits: Pennsylvania

Taxation of Employee Benefits requirements for other states

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

  • Salary deferrals to Internal Revenue Code (IRC) § 401(k) plans are subject to Pennsylvania income and unemployment insurance taxes. Salary deferrals for health benefits under IRC § 125 cafeteria plans are not subject to state income tax withholding. See Salary Deferrals to IRC § 125 Cafeteria Plans and § 401(k) Plans.
  • Same-sex marriage is legal in Pennsylvania. The value of health insurance benefits provided to an employee's same-sex spouse, and/or their dependents, is not taxable. The value of health insurance benefits provided to an employee's same-sex civil union partner is not taxable Pennsylvania. See Same-Sex Couple Health Insurance Benefits.