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California Conforms to Federal Health Care Coverage

On April 7, 2011, California state law conforms to federal law that provides a new category of excludable or deductible medical care expenses for a child who has not attained age 27 as of the end of the taxable year.

The federal health care Acts of 2010 made numerous changes to the health care system. One provision that became effective in 2010 requires group health plans and health insurance issuers that offer group or individual health insurance coverage, and that provide dependent coverage of children, to extend that coverage to children under age 27. For federal law, these benefits are excludable.

AB 36 adopts only this specific provision of federal health care Acts. It is effective immediately and applies to taxpayers filing their 2010 tax returns due April 18, 2011.

Taxpayers whose Form W-2 includes the amount of medical coverage for children under age 27 in California wages, should request that their employer issue Form W-2C excluding the amount from California wages. If this is not possible, taxpayers can use form FTB 3525 as a substitute for Form W-2C. Taxpayers should use the corrected wage form to file their state tax return to exclude from taxable income the value of this employer-provided medical coverage.

Self-employed individuals may deduct the health insurance premium paid for children under age 27. No adjustment from the federal tax return is needed.

Taxpayers who have already filed their 2010 state tax return reporting the amount of medical coverage for their children under age 27 in their California wages, should file a Form 540X, Amended Individual Tax Return, to exclude this income and claim a refund. The same applies for self-employed individuals who reported a California adjustment including the health insurance premium paid for children under age 27.

For more information, see Affordable Care Act.

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