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Taxation of Employee Benefits: California

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


  • Several different rules apply to the taxation of deferrals to IRC § 125 cafeteria plans and § 401(k) plans. See Salary Deferrals to IRC § 125 Cafeteria Plans and § 401(k) Plans.
  • Same-sex marriage is legal in California and the value of health insurance benefits provided to an employee's same-sex spouse, and/or their dependents, is not taxable. California also allows certain income tax exclusions for employer-provided accident and health insurance for registered domestic partners and their dependents. A temporary tax exclusion is permitted for amounts included in an employee's income that are attributable to benefits provided to a same-sex domestic partner. See Same-Sex Couple Health Insurance Benefits.