My wife started paying about $75/month for health coverage March of 2014. The premium was $222/month, and the premium tax credit was $152/month…..thus she was responsible for the $75 every month. FYI…no other insurance, e.g. employer coverage, was available, and she qualified for this reduced plan based on her lower income.
Now, here’s our question: We got married Sept. 13th of last year. Since I was not working at that time, our combined income shouldn’t have changed all that much (unless they counted my $2,000 monthly unemployment). Yet now, after entering Megan’s 1095-A from last year, I’m being told that she doesn’t qualify for ANY tax credit to help pay for 2014’s health plan. It doesn’t make sense. After entering the 1095-A for my wife, our estimated refund went from $2,500 down to around $500.
Is this right? Should a mid-year life-change such as marriage, affect the ENTIRE year, instead of a portion of the year? If not, I don’t understand why we have to pay back all of her tax credits.
Getting married or divorced can affect tax credits based on filing status. Use Premium Tax Credit Form 8962 alternative calculation for year of marriage. This can help you adjust tax credits and ensure you avoid repaying extra credits or missing out on claiming additional ones. Any 1095 forms you get will help you to fill out this part of the 8962 form (don't forget to claim exemptions using form 8965 as well).
Details can be found on Table 3. Shared Policy Allocation—Line 9 in the 8962 instructions.
If you get married or divorced during the year make sure to report your life change to the Marketplace so you can switch on or off a family plan and avoid an tax complications. You may consider taking less advanced tax credits up front to avoid repayment. Learn more from the IRS.
TIP: A custodial parent may use Form 8332 to release the "dependency exemption" to a noncustodial parent. This will allow the non-custodial parent to claim tax credits in a divorce (although one should note, the non-custodial will also owe the fee).