Question about ACA Subsidy Repayment

[AmandaS1989]

Ok so I have decided to claim my mom for the 2016 tax year as well as my brother. So now even though the overall cost of my plan is going up by $60/month I'll be paying $20 less per month. My brother has medicaid so I don't have to worry about being penalized for him, but my mom currently has no health insurance. She wants to file for Medicaid, but she's been denied before (even though my Dad draws only $1206/month in SS Disability). If she gets denied again, would I be penalized for her not having insurance if I claim her? If I can't claim her then my subsidy goes down quite a bit.

I guess I'm worried about being hit with a penalty for taking too much subsidy or for her not having insurance. Can anyone clear this up for me?

[Sibley]

I don't have answers, but some things to think about.

1. If your parents are married, I don't think you can claim one but not the other. Or maybe at all. Check that though.
2. In general, claiming people not your minor children as a dependent is tricky, make sure you get it right per IRS.
3. If you get too much ACA subsidy, I don't think there's a penalty, you just have to pay it back.
4. Does your mom qualify for Medicare? If not, then why did she fail the Medicaid rules? Also, due to ACA, the Medicaid eligibility may have changed in your state, or she could go to the marketplace herself and possibly get a subsidy.

Really, I think you need to talk to a tax professional to make sure everything's set up right and in everyone's best interest. Once you get the tax side settled, then figure out the health insurance side.

[AmandaS1989]

My Mom is married. My Dad does not file taxes since he only gets `$14500/year in SS Disability. So we agreed that since I live at home and help pay bills I can claim her if I want to.

She's only 51 so she can't get Medicare. I really don't know why she didn't qualify. Truthfully I don't think some of the people working down at the gov't office have a clue how to do their job. Also, since I live at home they counted my income as well. I don't think they're supposed to do that are they? NC did not expand Medicaid, so if she doesn't get it then I guess she'd be exempt right? But would she have to file for Medicaid and get denied in order to get the statement that says she's exempt? I don't want to claim her and get penalized for her not having insurance. But I need to claim her so my health insurance is more affordable for me.

[forummm]

I can't provide you tax advice--especially the whole issue of your parents being married and him not filing but you wanting to claim her. I think you need some tax advice from a professional. However, claiming her as a dependent means that you are responsible for whether she has insurance or not. The penalty for not having insurance in 2016 is $695/adult or 2.5% of your income above the filing threshold, whichever is greater. It also means that she counts as part of your household for Marketplace tax credit purposes.

https://www.healthcare.gov/see-plans

If you claim her you need to run through the link above and include her as part of your household. I honestly don't know how it works with your dad's income in there--get some tax advice. But another idea is to have them file together as a couple. If they can hit $15,930 (2015 figure) in taxable income for the year then that's over 100% FPL and she can get a huge tax credit for insurance. Can't she get some kind of income to boost them over the threshold?

[AmandaS1989]

Unfortunately not. My mother isn't really able to work as she has nerve damage in her leg and arthritis in her spine. She's actually applied for disability before but they turned her down since my Dad has it. They would need another $1500-2000 to hit the threshold but they just can't make it to that number. She told me she's going on Monday to apply for Medicaid though so we'll see how that goes.

As to getting professional advice, I am a staff accountant working at a cpa firm and my supervisor told me I could claim both of them if I wanted to if I provided more than half their support. My Dad's SS Disability isn't classified as earned income anyway so I don't think it would count towards that $15,930 threshold. If she gets denied for Medicaid I'm hoping she'll get a letter saying she's exempt from getting coverage. If not then I might have to re-apply for 2016 or just use much less of my subsidy to make sure I don't have to pay a lot back.

God this stuff is a pain in the ass to figure out sometimes.

[seattlecyclone]

My Mom is married. My Dad does not file taxes since he only gets `$14500/year in SS Disability. So we agreed that since I live at home and help pay bills I can claim her if I want to.

Getting to claim someone as a dependent is not simply a matter of "agreeing" that you can do it instead of someone else. See Publication 501 for the requirements. In particular, for a non-child to be your dependent they must have less than $3,950 of total income, and you must personally pay at least half of their living expenses. In addition, you cannot claim anyone as a dependent who is married and files a joint tax return.

If your mother meets those criteria and lives with you, I'm guessing the Medicaid people will be considering the total household income (including yours) when determining whether she qualifies for coverage. I would expect that either you both would be eligible for Medicaid based on your total income or neither of you would be.

[AmandaS1989]

My income is around $33,500 so no Medicaid for me. I don't know why they would consider my income for her eligibility though. I can't put her on my health insurance as a dependent since she's my mother so why would they count my income when she applies for Medicaid? *sighs* This is so messed up. Maybe I should just delete my 2016 application and redo it with just me and my brother on it.

[seattlecyclone]

My income is around $33,500 so no Medicaid for me. I don't know why they would consider my income for her eligibility though. I can't put her on my health insurance as a dependent since she's my mother so why would they count my income when she applies for Medicaid? *sighs* This is so messed up. Maybe I should just delete my 2016 application and redo it with just me and my brother on it.

You live with your parents and (assuming you do qualify to claim them as dependents) you pay for the majority of their living expenses. They are not wrong to consider you as one household when determining which benefits you qualify for. That said, it sounds like your only household income is $33.5k from your job and $14.5k in Social Security disability. That puts you at less than 250% of the federal poverty level for a family of three (maybe even less than this depending on whether the agency involved considers the social security income). You should be able to get some pretty heavily subsidized insurance from your local ACA marketplace.

[AmandaS1989]

But how can I get insurance for my mom if Medicaid denies her? Would she do an application for herself in the marketplace using my income since I can't put her on my health insurance? How does that work?

[seattlecyclone]

Yes, the subsidies are based on household income.

[AmandaS1989]

Ah I see. I thought that since she was married to Dad then she would have to use his income and couldn't use mine. Okay then. Since my brother is 22 and a full-time student, if she got insurance then he could be on it as well correct? Only problem is, my dad might not be able to afford to pay for insurance. If I paid for it, could I claim it on my taxes in some way?

[seattlecyclone]

Ah I see. I thought that since she was married to Dad then she would have to use his income and couldn't use mine. Okay then. Since my brother is 22 and a full-time student, if she got insurance then he could be on it as well correct? Only problem is, my dad might not be able to afford to pay for insurance. If I paid for it, could I claim it on my taxes in some way?

You can claim all of these family members as dependents, right? If that's the case, you're the only person who can claim the tax credit for insurance purchased on their behalf. See the "Eligibility" section of this Q&A for more info.

[AmandaS1989]

Ok I'm feeling incredibly dense right now so please bear with me.

How would my mom get insurance through the marketplace? Would she file her own application, and put household income as just my 33500 or my 33500 plus my dad's 14472 ss disability? I played around with the calculator and jeez either option is just plain unaffordable for us. I'm thinking if she doesn't qualify for medicaid then I'll just redo my 2016 application without claiming her. It sucks for her though since she really should have insurance.

[seattlecyclone]

Ok I'm feeling incredibly dense right now so please bear with me.

How would my mom get insurance through the marketplace? Would she file her own application, and put household income as just my 33500 or my 33500 plus my dad's 14472 ss disability? I played around with the calculator and jeez either option is just plain unaffordable for us. I'm thinking if she doesn't qualify for medicaid then I'll just redo my 2016 application without claiming her. It sucks for her though since she really should have insurance.

Your mom could probably file an application for herself and your brother together. What about your dad? Does he already have insurance from somewhere else?

How much income to report is an interesting question. The amount used for calculating ACA subsidies is your MAGI, as calculated per the instructions for line 2b of Form 8962. One important bit of information is that it says to "only include the modified AGI of those dependents who are required to file a return." That certainly would include you. If your parent's social security income isn't high enough to require tax filing, then you may be able to only report your own income.

Assuming that's the case, your $33,500 income is only about 142% of the poverty line for a family of four. That would mean that the second-cheapest silver plan for everyone buying coverage through the ACA marketplace should cost only about 3.5% of your income (about $100/month) after the subsidies. Another plan may cost less than this.

[AmandaS1989]

Wow that's not bad at all. I might try to find an expert on this stuff and see if they can walk me through this. Maybe my boss or supervisor would know. They're both CPAs.

Dad has medicare so he's good. My brother has medicaid so it's just me and mom who need insurance.

[jim555]

North Carolina did not expand Medicaid so people will fall into the "Medicaid gap".  Don't worry about the penalty since insurance will not be "affordable", you (or your mother) would get an exemption from the penalty.  Can mom do a Roth conversion to get her income over the Medicaid line and into a metal plan?

[AmandaS1989]

North Carolina did not expand Medicaid so people will fall into the "Medicaid gap".  Don't worry about the penalty since insurance will not be "affordable", you (or your mother) would get an exemption from the penalty.  Can mom do a Roth conversion to get her income over the Medicaid line and into a metal plan?

Nope Roth conversion isn't possible at all. My parents have no retirement savings. To get the letter saying she's exempt she would have to apply for medicaid and get denied first correct?

[jim555]

I believe SS income, or SSDI income is counted when considering the ACA, and it goes by household income.
I am not sure the steps needed to claim an unaffordable exception to the penalty.

[AmandaS1989]

I wouldn't need to include his income though since I am not claiming him on my taxes or listing him as part of my household correct?

[seattlecyclone]

I wouldn't need to include his income though since I am not claiming him on my taxes or listing him as part of my household correct?

Do you really think it's right that a person who lives with their spouse should be able to omit their spouse's income when applying for social programs? I would be very surprised if your local Medicaid office would permit that, but you would have to ask the people there to be sure.

[AmandaS1989]

I meant for the ACA application not the Medicaid one.

[jim555]

You should call and ask about what is considered a household, and what is considered income.

[seattlecyclone]

I meant for the ACA application not the Medicaid one.

Did you see my links above? It seems likely that your father's social security income is low enough that he would not be required to file a tax return. If that's the case, this income also would not count toward calculating ACA subsidies.

[AmandaS1989]

Ah I get it. Since he's not filing taxes his income doesn't need to be included. Okay. I'm thinking about deleting my 2016 application and re-doing it though. My mom dropped off her medicaid application today so I'll wait and see what happens with that. But if she gets denied, she can fill out an application in the marketplace, and put my income only as household income? Sorry if I don't seem to be getting it, but I get confused easily on this stuff. I'm also kinda paranoid about getting it right so I don't get hit with a penalty or something.

[jim555]

If your mom is not disabled, elderly (>=65), or blind she will not get Medicaid since she is part of the expanded group that South Carolina did not expand. 
If she was part of one of these groups there would be strict income and resource limits involved.