A: What’s a family? In our shifting social landscape, it could be a single-parent household, a domestic partnership, a same-sex marriage, an unwed cohabitating couple and more.
But when it comes to Obamacare, as Rich from Santa Ana notes, it’s all about taxes.
As if Obamacare needed something more to test its popularity. But let’s face it, the law – officially known as the Affordable Care Act – relies heavily on our tax data to determine program eligibility, financial assistance and also changes some tax rules.
“For anyone who purchases their insurance through the exchange ( Covered California), their returns will be more complicated,” warns Garry Browning, a certified public accountant in Modesto who trains other CPAs in Obamacare matters.
Thankfully, the answer to Rich’s question is relatively straightforward.
In general, spouses (as long as they file a joint return) and other relatives are considered part of the household if they’re claimed as tax dependents, Browning says.
Kids don’t have to be biological children to be dependents. As long as they meet certain criteria, they can be step-children, siblings, nieces/nephews and grandchildren.
That goes for aging parents and other relatives who also meet certain criteria.
If you’re applying for a family plan, dependents will figure into the calculation for tax credits, which will defray the cost of insurance premiums for those whose incomes qualify.
I know how badly you want to dig further into the nuances, so check out this helpful guide from the Washington, D.C.-based Center on Budget and Policy Priorities, a nonprofit that studies the effects of policy on low- and middle-income families and individuals. The guide includes several different household scenarios.
And please, please, as with this or any other tax issue, consult a tax professional to be sure.
A: Stan, I have some tough love for you here: If your wife wants a tax credit at all, you can’t file separately.
In order to be eligible for tax credits from Covered California, spouses must file their federal tax returns jointly.
That rule applies when both spouses are seeking health coverage. It also applies in cases like this, when just one spouse is buying a plan from Covered California.
That means both incomes will be used to determine the amount of tax credits for one plan. So what does that really mean? It means that the more income in the calculation, the lower the credit.
Just in case you thought you’d get away without a caveat, there’s at least one exception to this rule: If a couple is separated and living apart for the last six months of the year, the spouse who is caring for a dependent child could claim a special filing status that would NOT include the other spouse’s income, says Tara Straw, a senior health policy analyst at the Center on Budget and Policy Priorities.
It’s true, Obamacare makes it harder to claim an itemized deduction for medical expenses.
The good news for Phill from Riverside and others is that the deduction doesn’t disappear entirely. The bad news is that with the same income you’ll have to amass more medical expenses before you qualify.
Starting this tax year – 2013 – your unreimbursed medical and dental expenses must exceed 10 percent of your adjusted gross income, up from 7.5 percent, to claim the deduction. To reiterate, this debuts with this year’s taxes, which you will file next year. (Click here for an IRS fact sheet on the deduction.)
But to end this column on a happy note, here’s some good news within the bad news for seniors:
If you or your spouse is 65 or older, you are temporarily exempt from the increase through 2016. After that, welcome to the 10-percent club.
Questions for Emily: AskEmily@usc.edu