My 64 year old mother in law will need health insurance from Jan 2016 until June 2016 when she is eligible for Medicare. Currently she receives Social security survivors benefits as her only income. Does she need to file a 2014 tax return to be eligible for a 2015 subsidy until she reaches 65, or is she exempt from this requirement since her only income is Medicare? If she is exempt, would the state marketplace (MD) be aware of this and not penalize her for not filing a return?
Health insurance tax credits are based on Modified Adjusted Gross Income. Social Security survivors benefits only count toward MAGI of tax filers. So is a tax dependent does not have to file then MAGI income for social security isn't counted. This is true for most nontaxable Social Security income.
In the case above she would need to file taxes to have her Social Security Survivors benefits count as income.
The rule of thumb is that if you file nontaxable Social Security benefits count as household income, if you don't file they don't.
Also in general, a person who receives premium tax credits must file. They will need to file an 8962 - Premium Tax Credit Form. A person needs to project to make over the tax filing limit to receive Premium Tax Credits, and while they can potentially make less income and not HAVE to file, they should still file to adjust credits on the 8962.
"For purposes of the premium tax credit, your household income is your modified adjusted gross income plus that of every other individual in your family for whom you can properly claim a personal exemption deduction and who is required to file a federal income tax return. Modified adjusted gross income is the adjusted gross income on your federal income tax return plus any excluded foreign income, nontaxable Social Security benefits (including tier 1 railroad retirement benefits), and tax-exempt interest received or accrued during the taxable year. It does not include Supplemental Security Income (SSI)." - IRS