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 (in 2014, the threshold for a dependent to have to file a tax return was at least $6,200 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. Until she turns 26, it’s your choice to include her on your plan if you wish. 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, which means you may be eligible for subsidies in 2016 if the total MAGI is under $97,000 and none of you have access to affordable health insurance from an employer (be aware however, that not all enrollees with income under 400 percent of the poverty level actually end up qualifying for subsidies). Keep in mind that while you’re allowed to include your daughter on your plan until she turns 26, this may not be the best course of action if she doesn’t live near you, as the provider network on your family plan may not include providers in her area.
If your daughter gets her own policy, she’d be potentially eligible for subsidies in 2016 as long as her MAGI doesn’t exceed $47,080 (but the caveat about some enrollees not qualifying for subsidies despite having incomes under 400 percent of the poverty level is particularly true in the case of younger enrollees, since their plans are less expensive to begin with). If she gets her own plan, your family policy would be based on a three-person household and subsidies would potentially be available in 2016 if your MAGI (for you, your husband and your son if his income is over the tax-filing threshold) is under $80,360.