Married in 2022 - now wife has to pay back premium tax credit? (Form 8962 ACA)

[FrugalFisherman10]

My wife and I were married in 2022 and she was receiving the advance premium tax credit for having health insurance through the marketplace. We were married in July and I was not supporting her financially prior to that time period or anything like that. When we go through the tax forms it says that our combined income now makes her ineligible to receive any of the tax credit, so we have to pay it all back. Does that sound correct? It doesn't make sense to us that she would have to pay it back when she was making very little money throughout the first 7 months of last year until we were married in July. Sure our now combined income puts us way over the poverty level thing, but she was legit eligible for the tax credit for January  - July last year.

Next question: There is an alternate calculation that asks us to "allocate our family", etc., but I am not sure we are completing this section correctly either. It does not seem to take effect when you proceed through the screens and check to see how the form was filled in on your behalf.
Can you look into this with me and let me know how we should proceed?

Lastly we are thinking that if we could reduce her taxable income (and potentially mine) by a significant enough amount by contributing to traditional IRAs for 2022, we may re-qualify for her to receive the premium tax credit and not have to pay so much of it back.

numbers:
Family size: 2
modified AGI: 128,597
household income: 128,597
Federal poverty line: 17,420
box 5: 401%
box 7: 0.085
8a: 10,931
b: 911
9: Not using alternative calc (but maybe we could benefit from it)
10: No
11.
a) Monthly enrollment premiums: 371
 b)monthly applicable SLCSP premiums: 316
c) monthly contribution amount: 911
d) nothing
e) nothing
f) monthly advance payment of PTC: 246
24: Total premium tax credit: 0
25: Advance payment of ptc: 2,214
26: net: 0
27: Excess advance premium tax credit: 2,214
28: 0
29: 2,214

[MDM]

9: Not using alternative calc (but maybe we could benefit from it)

Don't know if you would or not.

What you list in the OP is how form 8962 would look for "plain vanilla" MFJ with 9 months of form 1095-A entries with the monthly amounts given.

Are you using tax software, and if so does it allow you to explore the Alternative calculation for year of marriage and show all worksheets from the Pub. 8962 instructions, and the Pub. 974 worksheets for Alternative Calculation for Year of Marriage?

[FrugalFisherman10]

hey thanks for the help. Yes i am using tax software (Freetaxusa.com) but I guess it doesn't give me an option to explore all the worksheets and instructions on my own...it only shows you the one as they fill it out for you. So i dug into the instructions for form 8962 for the alternative calculation and have the following attachments to share with you...I got a little fuzzy at the yellow highlighted part so would appreciate you looking at that.

Assuming I don't need to do anything differently at the yellow highlighted part, this does seem to suggest that using the alternative calculation for us would decrease the amount we  have to pay back right?

[FrugalFisherman10]

sry it seems I stopped too early. Here is the next worksheet I had to complete...

here's about 7 more worksheets. this is getting insane.

[FrugalFisherman10]

I stopped at Step 6.  going to have to come back to this tomorrow as I've already been staring at a screen all day for work!

[MDM]

I got a little fuzzy at the yellow highlighted part so would appreciate you looking at that.

Assuming that you did check the "Yes" box in question 3 in Table A, then only the first sentence of the yellow highlighted part applies and on to Step 3 you go.

As to the bottom line effect, I've never gone through all these steps so all I can suggest is "if you followed the directions, then the answer is whatever the answer is."  Good luck!

[Dicey]

With an income that high, could you just consider it a cost of doing business and move on with your new life? You seem to be in a very privileged position. Congratulations on your marriage!

[reeshau]

It is what it is, but I also encourage you to think of the whole picture.  You now have MFJ tax brackets.   And double the standard deduction.  (Which, if low income, probably didn't reduce taxes as much for you wife)  Should any of these benefits be reduced, similarly to the ACA penalty you now see?

Marriage is complex--dissecting in, even moreso.  And this is a transition issue; 2023 will see you on to your new situation.  Play around with it, but look forward, and move on.

[FrugalFisherman10]

It is what it is, but I also encourage you to think of the whole picture.  You now have MFJ tax brackets.   And double the standard deduction.  (Which, if low income, probably didn't reduce taxes as much for you wife)  Should any of these benefits be reduced, similarly to the ACA penalty you now see?

Marriage is complex--dissecting in, even moreso.  And this is a transition issue; 2023 will see you on to your new situation.  Play around with it, but look forward, and move on.

Yeah I guess so, but now we're just getting all philosophical.

and double the standard deduction? what's your point? There's two of us...so we have the same amount of standard deduction that we used to have...

As far whether this is worth all the effort, i'm not sure what i am even going to do with this "worksheets" once I find the bottom of this rabbit hole because I'm planning on filing using tax software. I need to go back to them I guess and just press them on whether they will do that alternative calc for me.

[Sanitary Stache]

The part about paying back the ACA tax subsidy sounds correct to me since it happened to my wife and I.  She was receiving subsidy on health insurance until we got married, then she switched to my insurance.  At tax time, my higher income meant she wasn't eligible for the subsidy and we had to pay it back. It was a major hit for us at around $6,000.  Our gross for the year was $60,000, so 10% of gross income had to be paid back. 

I wrote to our senators and congressional representative about it, since it seemed so rude.  I got a standard "ACA helps a shit load of people" and we moved on pretty quickly.

[reeshau]

and double the standard deduction? what's your point? There's two of us...so we have the same amount of standard deduction that we used to have...

It's the same headline number, but if she was in the 10% or 12% bracket, and you are in the 22%, then it's worth twice the tax savings now.

[FrugalFisherman10]

Thanks for everyone's help and input here...we've decided to forgo the alternative calculation nonsense for the federal return regarding the APTC, so we're stuck having to pay all of it back. I'm now trying to file my state return for Missouri and would like some help interpreting the screen in the attachment


On my Missouri tax return, it asks that we subtract from our income health insurance premiums paid. In our case, we paid health insurance premiums for a marketplace plan. Should we include those as a subtraction from our income?
It says not to subtract them if they are "pre-tax" or have already been excluded from our federal income. But in our case, we had to pay back all of the premium tax credits, so I think that they were not excluded from our federal income.

[secondcor521]

On my Missouri tax return, it asks that we subtract from our income health insurance premiums paid. In our case, we paid health insurance premiums for a marketplace plan. Should we include those as a subtraction from our income?
It says not to subtract them if they are "pre-tax" or have already been excluded from our federal income. But in our case, we had to pay back all of the premium tax credits, so I think that they were not excluded from our federal income.

I'm not from Missouri, but my state has a similar subtraction.

What we are permitted to do is add up all out of pocket health insurance premiums.  In the case of ACA plans, that would be the subsidized premiums your spouse paid in the first part of the year plus any amounts repaid on Form 8962.

The comment about pre-tax generally excludes workplace plan premiums like yours, because usually the premiums you pay for those are subtracted from your wages.  It also would exclude any SEHI deducted medical insurance, but that doesn't seem to apply to you.

[FrugalFisherman10]

On my Missouri tax return, it asks that we subtract from our income health insurance premiums paid. In our case, we paid health insurance premiums for a marketplace plan. Should we include those as a subtraction from our income?
It says not to subtract them if they are "pre-tax" or have already been excluded from our federal income. But in our case, we had to pay back all of the premium tax credits, so I think that they were not excluded from our federal income.

I'm not from Missouri, but my state has a similar subtraction.

What we are permitted to do is add up all out of pocket health insurance premiums.  In the case of ACA plans, that would be the subsidized premiums your spouse paid in the first part of the year plus any amounts repaid on Form 8962.

The comment about pre-tax generally excludes workplace plan premiums like yours, because usually the premiums you pay for those are subtracted from your wages.  It also would exclude any SEHI deducted medical insurance, but that doesn't seem to apply to you.

Nice...
hmm, so are we sure my wife's health insurance premiums weren't already deducted from our federal income?
we took the standard deduction...so there's my answer right? They weren't deducted on the federal side, so now I can deduct them on the state side?

[MDM]

we took the standard deduction...so there's my answer right? They weren't deducted on the federal side, so now I can deduct them on the state side?

Yes and yes.

Appears you don't have to include https://dor.mo.gov/forms/5695.pdf if "you included health insurance premiums paid as an
itemized deduction or had health insurance premiums withheld from your social security benefits" is false.