ObamaCare Tax Credits Getting Married or Divorced?
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.
Answer
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).
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I just got married in May and immediately switched to my husbands health insurance. I in turn only used access health when I needed it due to low income and my job not offering health insurance. I now am stuck paying back my entire tax credit. This does not seem right at all since when I was enrolled I was not in the position to pay any higher for my health insurance. Obamacare basically punishes you for getting married.
Hi Tracy D. So did you determine that there is no way around paying back the tax credit because of marriage later in the year? I am in the same situation. It does not seem fair at all. Thanks.
My husband was covered by obama care from Jan 2015- August 2015. He made less than 10K for the year. We married September 2015 and he joined my healthcare insurance which is not obama care. When we filed for taxes it took in consideration my 45K income and now we are being taxed an additional 1,500 to obama care because we make too much money?? How can you tax my income when my husband only had obama care up until the month before we were married?
You can file specific forms for the year of marriage (or divorce) to (likely) get around this. You would count your income monthly. Contact an accountant on this one.
This just happened to me. I have to pay back $1500 and have no clue how to do it. It would have been cheaper to go without the insurance and pay the fine!!
Like I said, double check 8962 alternatives for filing in the year of marriage and the 8965 form. Those are the key.
Are you kidding??? Had to laugh when I read this. How many people here have accountants?
Well they are small businesses in your local area who could use the business and do this for a living, so when dealing with difficult accounting issues they can be worth the premium.
My husband and I are in the same situation (he having been getting health care assistance while mine was covered in full through my employer). After checking out Pub 974, which was recommended after using a google search for the alternative marriage calculation, I was able to reduce the amount that we owed back from the advanced premium tax credit he had been taking for the first few months of 2015. It still took both of our incomes into account, which is unfortunate because I make quite a bit more than he does, but we were able to use half of our AGI for the calculation instead of the entire amount for the months before we were married. It’s a lot of reading, a lot of little additional worksheets (that you’ll find in the Pub 974), but it saved us about $240 of the $777 it was requiring us to pay back. Still doesn’t seem totally fair, and I agree with another comment saying that it seems like we are being punished for getting married, but at least it’s a little better than it had been without the alternative calculation for marriage.
Great information Thank you. Let me clarify:
The instructions for 8962 explain filing for alternative calculations for marriage… but they will in turn point you at pub 947 (which has more detail): https://www.irs.gov/instructions/i8962/
Pub 974 explains the “alternative calculation for marriage” in detail, which is how you deal with getting married under the ACA in regards to tax credits. https://www.irs.gov/pub/irs-pdf/p974.pdf
Hello –
My divorced was just finalized last week. My ex-husband has my children under his insurance through Wells Fargo, but I am currently uninsured and unemployed. I need to know the best course of action.
This being said, given my past work performance prior to being a stay at home mother (and given the financial predicament I have been left in), I will be finding a job in the next couple of months making $90,000+.
Can you please guide me on the best course of action?
Thank you so much.
My tax clients were divorce mid year. They received a 1095A for first 6 months for both, then last 6 months separate. How do I enter on single returns? If I show first 6 months amount on each return…give ex husband a large prem cr on 1040. and the Spouse a huge charge??
I think 8962 allows for you to do alternative filing in cases of marriage and divorce in the third section. There are some rules, and I don’t know them off hand, but try looking there.
spouse and I will not be allowed to file jointly for 2017, splitting up and for various reasons we can’t do a joint return on 2017. So now what happens to the Obama care. It seems this ridiculous way of administering obama care is that we are all suppose to be able to see into the future, and since that isn’t at all possible we all get robbed on taxes and fines for not being able to know the future. So basically from what I’m reading every penny of subsidy now has to be paid back to them, even though we qualified in 2016. The income hasn’t changed, just can’t file 2017 taxes together?
The subsidy my husband and I are currently receiving is based on our 2018 tax return. Our policy is good through Dec 2019. If we can be divorced before the end of 2019 than we can file separately for 2019 and get our own plans for 202, correct? If we stay married into the start of 2020 can we still have our own plans and base then on the individual income amounts from our joint return?
You can do an alternative calculation for divorce mid-way through a year, but yes the gist of what you say is correct. The ideal is to file your own taxes for the year in which you hold your plan so your plan year and tax year line up when it comes to income and assistance based on income.