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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.

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

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?

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).

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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 and Inflation Reduction Act, subsidies are larger and more widely available from 2021 through 2025 (that could be extended at a later date).

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
2 years 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!!

10 months ago
Reply to  P. williams

Why should other taxpayers have to pay for your health insurance when we are paying for our own? And to pass the buck to someone else is despicable. You are responsible for your own actions and stop trying to pass the blame onto others for your failure to do due dilegence. Its only a mess because you aren’t getting what you want at the expense of others – before when you were getting help it was OK. Truly pathetic.

Louise Norris
10 months ago
Reply to  Barry

Just to clarify one point — very very few Americans truly pay for their own health insurance. Almost everyone receives subsidies, either in the form of employer contributions, premium tax credits, tax breaks for employer-sponsored coverage or self-employed health insurance, or government subsidies for Medicare and Medicaid/CHIP. There are some people who truly do pay the full cost of their own coverage and don’t receive any tax breaks for it, but they are the exception to the rule.

S Rhatfield
S Rhatfield
10 months ago

My husband and I are still married, however, I moved out of our home in Illinois and purchased a home in Texas. We are not legally separated or divorced at this time and no plans for this in the near future. He is self employed. I will soon be losing my job (I am the healthcare provider) and we would like to sign up for a government plan. Since we live in different states, how do we sign up? I am assuming we cannot sign up together but it is saying we have to count each other as part of our household. If we apply separately, whose income do we report on each application? Do we just need to be legally separated in order to get a government plan?

Louise Norris
10 months ago
Reply to  S Rhatfield

If you’re planning to continue to file a joint tax return, you’ll each need to report your total household income when you enroll, and note that your household includes each other.

However, there is an exception for people who meet the definition of “married persons who live apart,” which is defined on page 15 of the instructions for Form 1040: (note that it does require that you provide the primary residence for at least one child in order to qualify for this)

The instructions for Form 8962 (which is used to reconcile premium tax credits) clarifies that you can file a tax return as unmarried and still claim the premium tax credit if you file a separate return from your spouse (1040, 1040-NR, or 1040-SR) because you “meet the requirements for Married persons who live apart,” which is explained in the instructions for those versions of the 1040.

I would really advise that you consult with a CPA who is knowledgeable about the tax ramifications (including health insurance premium tax credits and other issues) that would stem from the various approaches you could take here.

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