Does Inheritance Affect Marketplace Assistance?
My husband receives SSDI. I am unemployed and we purchased insurance thru the marketplace. My husband will be receiving a inheritance from his parent passing. Will this exclude us from receiving the monthly assistance for our healthcare? We only pay about 158.00 for our healthcare.
Answer
In general, inheritance does not affect Premium Tax Credits or Cost Sharing Reduction assistance because inheritance is not taxable on the federal level and not considered income for federal tax purposes. With that said, since earnings on inheritance can be taxable, it makes sense to consider the size of the inheritance and what you do with it (a large enough inheritance could generate enough taxable income in a year to affect tax credits for example).
Rate and Comment on the Answer
This site uses Akismet to reduce spam. Learn how your comment data is processed.
My brother and his wife had marketplace insurance due to limited income. Our father passed away in June of 2020 and left his estate to us both. He is now being told he needs to repay $8400 due to his income including the inheritance. He did not receive the inheritance until late in 2020. His estimated income was $7000 which was their 2019 income so that was the amount the premiums were based on. Does he have to repay the $8400 for the entire year since he didn’t have the inheritance until later in 2020?
Most inheritance is not taxable and therefore will not impact marketplace assistance or create a need to repay tax credits. However, taxable inheritance does impact marketplace assistance in the year it is received, if received at the end of the year it would therefore impact the repayable amount but not likely the assistance given during the year.
In your case above, it could be that the estate generated taxable income of a large enough amount to trigger the repayment limit. If so, that is what would have caused this. I would double-check you are counting taxable income though, and see if it is inheritance tax or estate tax that is causing this.
See repay limits: https://obamacarefacts.com/advanced-tax-credit-repayment-limits/
See instances in which inheritance may have tax implications: https://smartasset.com/retirement/is-inheritance-taxable
Is distributions from an INHERITED IRA count against you if you have insurance through the marketplace?
I paid the taxes owed on the distribution, understand that. But why am I being punished by the marketplace to pay my whold insurance bill
The short answer is that assistance for healthcare is based on taxable income, and thus if you had to pay taxes on the inherited IRA it impacts cost assistance. Now with that said, the tax implications of inherited IRAs aren’t simple, so you might want to talk to an accountant to help you figure out if there is a better way to deal with this assuming it is happening this year and not last year.
I like this answer but it seems to conflict with that below. Need numbers to fully understand.
Question: My wife and I both retired one month ago. I have Medicare, she has Obamacare based on 2021 estimated earnings. She is soon to receive about $40K in inheritance. I am getting conflicting stories on whether this IS or IS NOT income affecting her Obamacare subsidy. It is not taxable.
If it DOES affect her subsidy, can we shelter it before accepting a check?
The short answer is this:
1. Most inheritance income is not taxable.
2. Non-taxable inheritance income does not impact ObamaCare assistance.
3. Taxable inheritance income does impact ObamaCare assistance. So in a situation where an inheritance resulted in taxable income (for example, earnings on inheritance in a large enough amount), then it could impact tax credits.
So it boils down to whether or not the inheritance is taxable and then knowing that it most likely isn’t. I don’t think your $40k on inheritance is going to impact you, but you can always ask an accountant or call the marketplace for a second take. Of course, the accountant may be best as they will know your exact situation and can help advise you from that standpoint.
Hope that helps!