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What happens to a young adult who applies for premium tax credits the first year she is independent, and so she hasn’t filed a return in prior years?

One challenge a young adult may face in her first year of independent tax filing is verifying income, since one of the prime sources of income data is a prior year tax return. However, other methods of verification are available; for instance, the Marketplace will have access to monthly wage data that can verify current income. In the case of someone who is self-employed or who has fluctuating income, additional documentation of income may be accepted.

The fact that a young adult has not filed in the past will not prevent her from receiving premium tax credits.  When she applies, if the Marketplace cannot verify her income right away, she will receive a provisional (temporary) eligibility determination based on the income information she puts in her application.  The Marketplace will then give her a period of time (usually 90 days) to provide additional documentation of income.  Current pay stubs, bank deposit records, or other documentation may be appropriate, depending on her situation.

What income is counted in determining my eligibility for premium tax credits?

Eligibility for premium tax credits is based on your Modified Adjusted Gross Income, or MAGI. When you file a federal income tax return, you must report your adjusted gross income (which includes wages and salaries, interest and dividends, unemployment benefits, and several other sources of income.)  MAGI modifies your adjusted gross income by adding to it any non-taxable Social Security benefits you receive, any tax-exempt interest you earn, and any foreign income you earned that was excluded from your income for tax purposes.

Note that eligibility for Medicaid and CHIP is also based on MAGI, although some additional modifications may be made in determining eligibility for these programs. Contact your Marketplace or your state Medicaid program for more information.

If I’m eligible for other coverage but haven’t enrolled in it yet, can I qualify for premium tax credits in the Marketplace?

For certain types of coverage, if you are eligible but not enrolled, then you can still qualify for premium tax credits. These include:

  • Retiree health coverage offered by a former employer
  • COBRA coverage
  • Student health plan coverage
  • Medicare Part A coverage requiring payment of premiums

In addition, during Open Enrollment, if you are already enrolled in these types of coverage, you can apply for Marketplace coverage and subsidies and then drop your other coverage as of the date your new Marketplace coverage will take effect.

However, if you are eligible for job-based coverage (that is affordable and meets minimum value) or for Medicaid or CHIP, but you didn’t enroll, then you are not eligible for premium tax credits.

When can I apply for Marketplace premium tax credits when other coverage is available?

In general, if you have, or are eligible for, any of the following types of coverage, you would be ineligible for premium tax credits through the Marketplace:

  • Employer-sponsored coverage, unless the coverage is unaffordable (your required contribution to the premium for self-only coverage in 2018 costs more than 9.56% of household income) or does not meet minimum value (an actuarial value of less than 60%).  Special rules apply when the affordability of family coverage is a concern.
  • Government-sponsored coverage, including Medicare Part A coverage, Medicare Advantage plans, Medicaid coverage and the Children’s Health Insurance Program coverage, Veterans health coverage and TRICARE (coverage for members of the military)
  • Coverage for Peace Corps volunteers

However, if you have access to other types of coverage, you can still be eligible for premium tax credits, assuming you meet other requirements:

  • Individual (non-group) health insurance
  • Student health coverage
  • Coverage as a dependent under your parent’s group health plan if you are under age 26 and not claimed as a tax dependent by your parent
  • Retiree health coverage offered by a former employer
  • COBRA coverage

How do I apply for premium tax credits?

On the health insurance Marketplace web site, you will find an Application for Health Coverage and Help Paying Costs. Filling out the application online is the fastest, though you can also submit a paper application or call your Marketplace call center and apply over the phone. The Application will ask you basic information about yourself (and any family members who are applying for coverage with you) including your Social Security number and information about your citizenship or immigration status. It will also ask employment and income information, including what’s on your most recent income tax return. Once you’ve submitted the application, the Marketplace will let you know if you qualify for help paying for Qualified Health Plans it offers. It will also let you know if you (or any members of your family) may be eligible for coverage through Medicaid or the Children’s Health Insurance Program.

To complete the Application for Health Coverage and Help Paying Costs online, you will need to create a secure personal account with a login ID and password.

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