Household Size

The amount of premium tax credits that a household is eligible to receive depends on their household size and household income as a percentage of the Federal Poverty Level (FPL).

Who's in your household?

The tax household is determined based on marital status, this includes same-sex couples. A household takes into consideration relationship, age, residency, and support in paying for living expenses.

Families at different income levels are expected to contribute different percentages of their income towards premium payments.

• Higher income families are expected to pay a greater percentage of their income towards premiums than lower income families.

Premium tax credits?

A person’s household includes all the individuals that person would claim when filing taxes. Typically it would be the tax filer, the tax filer’s spouse (if married filing jointly), and any individual the tax filer claims as a dependent.

Everyone a person includes on their taxes is included in the household — even family members who are not applying for coverage and those who are not eligible for premium tax credits.

• Unmarried couples with children may be eligible for premium tax credits. The amount of the credit will be calculated on how you file your taxes.

Where you live may effect the type of coverage your family can purchase. Some states recognize and register domestic partnerships. All insurance companies will offer family policies to married couples but not all will offer family policies to domestic partners who are not married.

The Internal Revenue Service (IRS) has detailed rules on who can file taxes together and who can be claimed as a dependent by a tax filer.

See Tax Guide - IRS Publication 17

♦ The requirement to file taxes, not whether someone actually files taxes, determines whether an individual's income must be included in a household's income.

Household examples

♦ John and Mary are married and have one child, Susan

They have a tax household consisting of three people. Susan is enrolled in the Children’s Health Insurance Program (CHIP), which would make her ineligible for premium tax credits. However, she is still included in John and Mary’s household size.

♦ Bill and Jane are married and have two boys

The youngest son is still in high school and is claimed as a dependent on Bill and Jane’s taxes. The oldest child is 22 and living at home with his parents. The oldest is working full-time while living at home. The oldest son will file his own taxes so cannot be claimed as a tax dependent by his parents.

For premium tax credit purposes, Bill and Jane along with the younger son are one household of three. The oldest son is his own household because he is not claimed as a dependent.

26 year old rule ….

♦ Bill and Jane are married and have two boys

The youngest son is still in high school and is claimed as a dependent on Bill and Jane’s taxes. The oldest child is 22 and living at home with his parents. The oldest is working full-time while living at home. The oldest son will file his own taxes.

The oldest son is in a different tax household but he can still enroll in a plan with his parents because he is under the age of 26.

If they enroll in a family plan together, the premium tax credit will be determined separately for tax household.

Bill and Jane’s premium tax credit will be based on their income as a household of three (Bill + Jane + youngest son). The oldest son’s premium tax credit will be based on his income as a single household member.

At tax time, Bill and Jane will file a tax return and reconcile their tax credit. And the oldest son will file his own tax return and reconcile his tax credit.

Taking care of an older relative

♦ Beth lives with her son Peter and her aunt Mary

Beth supports aunt Mary. Aunt Mary is too young to apply for Medicare so she must obtain health insurance on her own.

Beth is the tax filer. She claims both her son and her aunt as dependents. Beth’s household consists of three.

• Purchasing insurance through the Marketplace gets a little confusing. For premium tax credits Beth’s household is three.

But most insurers do not want to include aunt Mary in a family plan covering Beth and Peter. Aunt Mary will need to select a separate health plan.

Even though the family is covered through two separate health plans, the family is still considered one household for determining their premium tax credit. A household of three. The tax credit will be applied to the two health plans.

At tax filing time, Beth is the person responsible for reconciling the tax credit on her taxes because she will also be claiming aunt Mary as a dependent.

Earns too much

♦ Beth lives with her son Peter and her aunt Mary

Beth supports aunt Mary. Aunt Mary is too young to apply for Medicare so she must obtain health insurance on her own.

Beth is the tax filer. She claims both her son and her aunt as dependents. Beth’s household consists of three. Mary qualifies as Beth’s dependent. Beth would like to enroll Mary in a Marketplace plan, but Beth’s income is too high to receive premium tax credits.

Because Mary is Beth’s dependent things get really confusing. If Beth chooses not to claim Mary as a dependent on her tax return, Mary is not eligible to claim her own personal exemption on a separate tax return. The reason is tax related.

Mary qualifies as Beth’s dependent — whether or not she claims her on her tax return — Mary cannot qualify for premium tax credit on her own.

If Mary applies for health coverage on her own, and at tax time she attempts to file a separate tax return, she will be found ineligible for the tax credits she received and she will need to repay them.

If Beth claims Mary as a dependent at tax time, any tax credit Mary received will need to be reconciled on Beth’s tax return. If Beth’s income makes her ineligible for tax credits she will need to repay the credits Mary received.

Filing separate tax returns

Married couples must file a joint tax return to be eligible for premium tax credits. This includes legally married same-sex couples.

♦ If not married - if you are in a domestic partnership, a civil union, or other relationship - you may still be able to get premium tax credits but you will need to apply for them separately as individuals instead of as a couple. If there are children, the person who claims the child or children as a dependent for tax filing will need to list that dependent as part of their household.

Married couples who file as married filing separately are not eligible for premium tax credits except in the following cases:

Head of household. A person who is married but does not file jointly with a spouse can sometimes qualify as Head of Household, to be eligible for premium tax credits. A person can be head of household if he or she is unmarried or considered unmarried by the IRS for tax purposes.

• They must meet all of the head of household rules — living separate for the last 6 months and paying more than half of the costs of keeping up the home for a person whom he or she will claim as a dependent (child).

• The marketplace application does not have an option for “head of household.” If you report on the application “married filing separately” you will be ineligible for premium tax credits.

• Individuals in this situation should apply as “unmarried.” Sounds odd but this is the government.

Domestic violence or abuse. A married person who lives apart from his or her spouse and is unable to file a joint tax return due to domestic violence may qualify for premium tax credits by stating this situation on his or her tax return.

Abandoned by his or her spouse. A married person is still eligible for premium tax credits if he or she has been abandoned by a spouse and certifies on his or her tax return that they are unable to locate the spouse after “reasonable diligence.”

Note: You can claim abandoned spouse exception for no more than three consecutive years.