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My wife and I each make about $40,000 a year. If we file our taxes separately, can we each qualify for an exchange subsidy?

The guidelines for ACA premium subsidy eligibility are determined by total household income and the number of people in the household.

Q.  My wife and I each make about $40,000/year.  If we file our taxes separately, can we each qualify for an exchange subsidy?

A.  No. The guidelines for eligibility are determined by total household income and the number of people in the household. And for enrollees who are married, subsidies are only available if they file a joint tax return with their spouse (with very limited exceptions, described below).

Subsidy eligibility is based on a household’s income (there’s an ACA-specific calculation for that) relative to the federal poverty level.

The poverty level for a household of two is much less than twice the poverty level for a single-person household. This makes sense, as it’s less expensive for two people to maintain one household than to maintain two separate households. But taxpayers whose filing status is married filing separately are explicitly ineligible to receive subsidies in the exchange, regardless of their income. (See this IRS publication for more details).

Premium subsidies have to be reconciled on your tax return, using Form 8962. If you receive a premium subsidy during the year and then end up using the married filing separately status, the full amount of the subsidy that was paid on your behalf would have to be repaid to the IRS with your tax return.

In March 2014, the IRS issued a special rule with regards to married people who are unable to file a joint return because of domestic abuse. If a taxpayer files as married filing separately, premium tax credits are still available as long as (1.) the spouses are not living together, (2.) the taxpayer is unable to file a joint return because of domestic violence, and (3.) the taxpayer indicates this information on his or her tax return.

The instructions for Form 8962 (used to reconcile the premium tax credit) also note that an exception can be made for certain married couples who file separately because they live apart from each other or due to spousal abandonment. But the rules also clarify that the exception for spousal abandonment or domestic violence cannot be used for more than three consecutive years.

For everyone else, the rules are clear that married couples must file a joint tax return in order to qualify for subsidies in the exchanges. But thanks to the American Rescue Plan, subsidies are larger and more widely available in 2021 and 2022.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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P. williams
1 year ago

Dear Ms. Norris,
I am a 65-y/o and married. I found out in the middle of the year that my spouse started his SS benefit early along with another job he picked up as well as myself working a full time job in 2019. I was on the ACA, as well as he was until he became 65 in Oct and collected early. By the time I found this out, as we know you can only make so much within the year. To make a long story short it put us in a different category way above being eligible for the premiums subsidies, to only find out on our 2019 taxes we owe all back In the thousands! That we don’t have! I don’t understand why none of this is even explained to you when going through the ACA. . I thought maybe I could file married separate to only read above I am unable. I even am not sure if I could file an innocent spouse form. In any event I am sure it would not matter. Is there any way out of this mess?
I have had nothing but problems with the ACA since I was enrolled in it by an independent agent who I feel didn’t stay on top of things. So I decided to go through the marketplace Another mess! We had BCBS of Florida for 2019 they did not have me enrolled for 3-months through the ACA -due to my spouse being on Medicare and was primary on the policy. So therefore cancelled me as well. I handled everything efficiently and called his agent to let him know my spouse was on Medicare effective Oct 1 2019 to take him off in Oct. I called BCBS in September to do this as well and fought with them for months due to ongoing issues, by them. And our tax return if reflecting these months as well. This is a complete mess!!

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