Q. My husband and I have two children. We claim our son on our taxes; he’s in high school, lives at home and has a part-time job. Our 23-year-old daughter has her own place and we don’t claim her on our taxes. She has a full-time job but it doesn’t provide insurance. We’re going to buy insurance through the exchange for ourselves and our son, but we don’t know whether we should add our daughter to our plan or have her get her own. For premium subsidies, how does the exchange calculate household income for families like ours?
A. Subsidy eligibility is based on modified adjusted gross income. For your family, your MAGI will include income for yourself and your husband, and it could also include income your son earns at his part-time job – but only if he earns enough to have to file a tax return as a dependent (at least $6,100 in earned income).
So if your son earns $5,000 over the year, his income would not be included in your household MAGI. But if he earns $8,000, that money would be included in your household MAGI. This would be the case even if you were not going to add him to your health insurance policy – he’s part of your “tax household.” (This is also true for spouses who are not going to be covered on the new policy; their income counts as part of the household MAGI, but they also count as an extra person for the purposes of calculating the household’s income as a percentage of poverty level.)
Your daughter’s income would only be included in your household MAGI if you include her on your new policy. If you do cover her, your household income would include anything you and your husband earn, your daughter’s income, plus your son’s if he’s above the tax-filing threshold. And your household would be considered four people, so you’ll qualify for subsidies if the total MAGI is under $95,400.
If your daughter gets her own policy, she’ll be eligible for subsidies as long as her MAGI doesn’t exceed $46,680. In that case, your family policy would be based on a three-person household and subsidies would be available if your MAGI (for you, your husband and your son if his income is over the tax-filing threshold) is under $79,160.
[Be aware that a 23-year-old might not get a subsidy if her income is approaching 400 percent of poverty, simply because her unsubsidized premium might be a very small percentage of her income – subsidy eligibility is based on income, but it's also based on the price of the second lowest-cost Silver plan in the exchange as a percentage of the applicant's income.]