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Tag: income

I am still legally married, but live apart from my spouse because of domestic abuse or abandonment. I cannot file a joint tax return. Can I qualify for premium tax credits if I file as married-filing-separately and don’t take into account my spouse’s income?

Yes.  If you are married but unable to file a joint return because of domestic abuse, you can file as married-filing-separately and claim the premium tax credit.  Similarly, if you cannot file a join return because you are unable to locate your spouse due to spousal abandonment, you can file as married-filing-separately and claim the premium tax credit.  In either instance, you will need to check the “Relief” box in the top right-hand corner of Form 8962 and file that with your tax return.  You are not required to submit documentation of the abuse or abandonment with your tax return, but should keep any documentation for your records.

I am married but my spouse and I live apart and we do not file a joint tax return. Instead, I use the “married filing separately” tax filing status. I have low income and need help paying health insurance premiums. Can I qualify for premium tax credits?

Generally no. Married taxpayers are required to file a joint tax return in order to qualify for premium tax credits. People who use the “married filing separately” status are not eligible to receive premium tax credits (and also cannot claim certain other tax breaks, such as the child and dependent care tax credit, tuition deductions, or the earned income tax credit.)  There is a special exception, however, for individuals who must file separately because of domestic abuse or spousal abandonment.

For other married individuals who do not file a joint return, there may be other options.

If you have a dependent and meet certain conditions, you may be able to use the “head of household” filing status. People who file a tax return using this filing status can qualify for premium tax credits.

In addition, if you expect to be divorced by the end of the tax year, you will be able to file as a single taxpayer for that year and could qualify for subsidies under that filing status when you file your taxes.  However, you may not be able to receive all of the premium tax credit that you’re entitled to in advance if you are not yet divorced with you make your Marketplace application.  Except in cases of domestic abuse or spousal abandonment you should not say on your application that you are unmarried when you are still married.

Check with your tax adviser or a health insurance Marketplace Navigator for more information.

My partner and I live together but are unmarried. Is our combined household income what we should report?

Because you are not married, you will be considered two separate households for the purposes of determining eligibility for premium tax credits and Medicaid. Assuming that neither of you are claiming any dependents on your tax returns, you will each be considered as a household of one and your own income will be used to determine eligibility for premium tax credits and Medicaid as well as the amount of any premium tax credit and cost-sharing reduction you may qualify for. If you are eligible for premium tax credits, you will each receive a separate determination of the amount of your credit and whether you are eligible for a cost-sharing reduction. Whether you can use your credits to buy a family policy rather than two individual policies will depend on the offerings in your state Marketplace.

If I’ve not filed taxes in a prior year, how will the Marketplace determine my income?

If an applicant did not file taxes in a prior year, income will be verified by the Marketplace through use of electronic wage data. If the information cannot be verified electronically, the applicant may be asked to submit additional paper documentation within 90 days, such as pay stubs, a work contract or other verification of income.

I never filed an income tax return before. Can I claim a premium tax credit this year?

Yes in most cases. People who have not filed a tax return before can qualify for a premium tax credit. However, there is a requirement to file a return for the tax year in which you receive a premium tax credit.  If you got an advanced premium tax credit last year, you must file a federal income tax return for that year to be eligible to receive an advance premium tax credit next year.

I estimate my income next year will be 140% of the federal poverty level, so I need a premium tax credit and I need to have it all paid in advance. If, by the end of the year, it turns out my annual income was even lower – 130% of the federal poverty level – so I could have enrolled in Medicaid, will I have to pay back the premium subsidy?

No, your final premium credit amount will be determined based on your income for the year as reported on your tax return. The fact that it ended up being 130% of the poverty line does not mean you have to pay back the premium tax credit you received. In fact, your final credit amount will likely be larger than the amount you received in advance.

My income is uneven during the year. Some months I earn very little, other months are much better. I think my annual income will be low enough to qualify for subsidies next year, but I’m not sure. What if I’m wrong?

It’s common for income to fluctuate, particularly if you are self-employed, perform seasonal work or have multiple jobs. To achieve the most accurate premium tax credit amount, you should report income changes to the health insurance Marketplace during the year, as they happen. Otherwise, if you claim a premium tax credit during the year based on estimated income and your actual income for the year edges over 400% FPL, you will need to pay back the full credit amount. To avoid this result, if you estimate your annual income will be close to 400% FPL, you could also consider waiting until you file your taxes to take all or a portion of the premium tax credit on your tax return instead of receiving advance payments.

What if I don’t know what my income will be next year?

When you apply for the premium tax credit, you will be asked to estimate your expected income for the upcoming year. Often a good place to start is to consider what your income is this year, or what income you reported on your tax return last year. However, if your circumstances have changed since then, for example, if you recently lost your job, you should make your best estimate of what your income will be next year. The health insurance Marketplace will compare your income estimates against records at the Internal Revenue Service, Social Security Administration and other sources. If your estimate and official records don’t match, or aren’t sufficiently close, but you meet all other eligibility requirements, you might be asked to provide documentation to support your income projections.

In general, if the income amount shown on that official record is more than 25% or $6,000 (whichever is greater) higher than the amount you put on your application, you might receive a data match inconsistency notice from the Marketplace and you’ll need to provide more documentation.

If you don’t have that documentation handy, the Marketplace will provide subsidies for up to 90 days while you gather and submit your documentation for verification. It is very important that you provide any documentation requested by the Marketplace in a timely manner; if you don’t your subsidies might be reduced or terminated.

Keep in mind that if you estimate your income incorrectly and end up claiming more help than you are eligible for, you may have to pay back some or all of the premium tax credit you received. If you over-estimate your income and end up claiming less help than you are entitled to, the difference will be refunded to you when you file your income taxes the following year.

I understand eligibility for premium tax credits is based on our household income. Who counts as being in my household?

A household, for purposes of determining eligibility for premium tax credits, includes any individuals whom you list on the federal tax form. That includes yourself, your spouse, and dependents. Dependents include children who meet certain requirements:

  • U.S. citizen or resident of the U.S, Mexico or Canada
  • Live with you for more than half the year
  • Under age 19 at the end of the year (or under age 24 if a full-time student); a child is considered to live with the taxpayer while he or she is temporarily away from home due to education, illness, business, vacation or military service.
  • Doesn’t provide more than 50% of his or her own support

Other adults who can count as dependents include relatives, in-laws or full-time members of your household who:

  • Are a U.S. citizen or resident of the U.S, Mexico or Canada
  • Receive more than 50% of their support from you
  • Are related to you or live in your home all year
  • Make less than $4,150 (in 2018), generally excluding Social Security

A household can include individuals even if they are ineligible for tax credits (for example, individuals who are not lawfully present). Your household size can change during a year due to family changes, including the birth or adoption of a child, a child moving out of the house, and divorce or legal separation. When such changes take place you should report them to the Marketplace as they may affect your eligibility for subsidies. Family changes also can trigger a special enrollment opportunity when you can change health plans, even outside of the regular Open Enrollment period.

Note that the definition of household for determining eligibility for premium tax credits sometimes differs from the definition of household for determining Medicaid eligibility. Ask your Marketplace for more information about who should be counted in your household.