New ACA 2018 Dependent Income Rules?

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newcollegeman
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New ACA 2018 Dependent Income Rules?

Post by newcollegeman » Fri Nov 02, 2018 8:58 pm

ACA Obamacare is a tax matter & I'm reading that Dependent Income Rules changed with the new tax law for 2018:

http://www.healthreformbeyondthebasics. ... nges-2018/

The above link claims that the Dependent Earned Income Filing Requirement has been raised for 2018 to $12,000, implying that below that level a family is free to not file a 1040 for a child & thus not show such income as a part of ACA Obamacare MAGI Household Income....

However, saying my DD engineering college kid who earned $6000 in a summer job does not have to file a tax return is counter intuitive to me: she had taxes withheld & she will need to file for a tuition credit, so I think she will have to file. Or am I missing something here?

Our family income is low & we have to be careful not to fall off the lower ACA Obamacare cliff into Medicaid. Whether our DD's $6000 summer earnings count towards our ACA MAGI or not is an important detail.

Can anyone help me understand?

Many thanks,

newcollegeman

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newcollegeman
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Re: New ACA 2018 Dependent Income Rules?

Post by newcollegeman » Fri Nov 02, 2018 10:20 pm

Any advice?

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MP123
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Re: New ACA 2018 Dependent Income Rules

Post by MP123 » Fri Nov 02, 2018 10:24 pm

This is an interesting question and the opposite of what is often asked on here.

As I understand it you want to include your dependent daughter's income on your (or her, incuded in your household) 1040 to make sure you're over the lower ACA cliff that falls into Medicaid?

Does your daughter have only earned income? If so she may not be required to file if less than the $12k standard deduction in 2018. But you want her to so you can include the income...

I believe she can file for example if she is eligible for education credits (AOC) and that income would also count towards ACA if it ends up being part of your MAGI.

There's plenty of changes for 2018 taxes though and I'm not sure they've all settled yet.

JGoneRiding
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Re: New ACA 2018 Dependent Income Rules?

Post by JGoneRiding » Fri Nov 02, 2018 10:28 pm

Not required to file is different then not allowed. Some people file and report $1 in earned income in order to prevent fraudulent claims on their ssn

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newcollegeman
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Re: New ACA 2018 Dependent Income Rules?

Post by newcollegeman » Fri Nov 02, 2018 10:41 pm

MP123,

I need to avoid surprises: I just need to know what the proper thing to do is under the new law for 2018.

It just strikes me that she must file, due to having had taxes withheld from wages that need to be reconciled & possibly refunded on $6000 of summer wages, as well as the need to file to receive a tuition credit.

It’s counter intuitive to me that someone could earn $6000 and not be able to file state & federal income tax forms.

Either way, I can manage, but I just have to know if she is allowed to file & if it will count towards our ACA Household MAGI.

Does that make sense?

Thank you for your kind help,

Newcollegeman

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MP123
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Re: New ACA 2018 Dependent Income Rules?

Post by MP123 » Fri Nov 02, 2018 11:00 pm

You're certainly allowed to file even if you aren't required to.

This might be advantageous in cases like yours or people that want to take education credits or other refundable tax situations.

What I'm not sure of is whether your daughters income will be reduced to zero on your or her return (considering the new standard deduction) and so not be a benefit towards qualifying for ACA.

It's definitely worth modeling it in TurboTax or similar.

marcopolo
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Re: New ACA 2018 Dependent Income Rules?

Post by marcopolo » Fri Nov 02, 2018 11:43 pm

newcollegeman wrote:
Fri Nov 02, 2018 8:58 pm
ACA Obamacare is a tax matter & I'm reading that Dependent Income Rules changed with the new tax law for 2018:

http://www.healthreformbeyondthebasics. ... nges-2018/

The above link claims that the Dependent Earned Income Filing Requirement has been raised for 2018 to $12,000, implying that below that level a family is free to not file a 1040 for a child & thus not show such income as a part of ACA Obamacare MAGI Household Income....

However, saying my DD engineering college kid who earned $6000 in a summer job does not have to file a tax return is counter intuitive to me: she had taxes withheld & she will need to file for a tuition credit, so I think she will have to file. Or am I missing something here?

Our family income is low & we have to be careful not to fall off the lower ACA Obamacare cliff into Medicaid. Whether our DD's $6000 summer earnings count towards our ACA MAGI or not is an important detail.

Can anyone help me understand?

Many thanks,

newcollegeman
Why would you even consider not filing? That is the only way she will get back (most of) her withheld taxes, plus it gets you over the ACA floor.
The rules say below $12k, she does not NEED to file, but there is nothing preventing her from doing so if it is to your/her advantage.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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newcollegeman
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Re: New ACA 2018 Dependent Income Rules?

Post by newcollegeman » Sat Nov 03, 2018 6:17 am

Thank you both for helping me on this. I will model. This on TurboTax, since so much is at stake. And we will all file, so as to get withheld taxes back, not leave tuition credit on the table & simplify keeping above the ACA lower cliff!

Can’t say enough about how the Bogleheads have been a source of reasonable, reliable, and insightful advice on practical matters of life. Our family owes a debt of gratitude to Jack & all his friends!

Newcollegeman

rjsob58
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Re: New ACA 2018 Dependent Income Rules?

Post by rjsob58 » Sat Nov 03, 2018 7:12 am

This is making my head hurt. I am struggling to understand all this and the consequences of making a mistake are huge for me.

I'm trying to stay below the upper end of the ACA subsidy cliff. I have 2 teenage sons who both worked part time this year but neither made more than $12k. If I have to include them in my household MAGI, or more importantly if the ACA requires their income to be included, then it puts us right at or above the 400% FPL and I get $0 in subsidies. They will want to file taxes to get their withholdings back.

If they do file taxes, but make less than $12k each so are not REQUIRED to file taxes, are you saying I don't have to include their income in my household MAGI? :confused

jebmke
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Re: New ACA 2018 Dependent Income Rules?

Post by jebmke » Sat Nov 03, 2018 7:12 am

marcopolo wrote:
Fri Nov 02, 2018 11:43 pm
Why would you even consider not filing? That is the only way she will get back (most of) her withheld taxes, plus it gets you over the ACA floor.
The rules say below $12k, she does not NEED to file, but there is nothing preventing her from doing so if it is to your/her advantage.
Returns like these are often so simple they can be filed very early in the cycle. This essentially locks the SSN with the IRS and nobody else can file with that SSN.

In our TaxAide sites, we have done a 180 and instead of sending people away who do not need to file, we are filing them anyway to (hopefully) prevent ID theft.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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HueyLD
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Re: New ACA 2018 Dependent Income Rules?

Post by HueyLD » Sat Nov 03, 2018 7:15 am

newcollegeman wrote:
Fri Nov 02, 2018 8:58 pm
ACA Obamacare is a tax matter & I'm reading that Dependent Income Rules changed with the new tax law for 2018:

http://www.healthreformbeyondthebasics. ... nges-2018/

The above link claims that the Dependent Earned Income Filing Requirement has been raised for 2018 to $12,000, implying that below that level a family is free to not file a 1040 for a child & thus not show such income as a part of ACA Obamacare MAGI Household Income....

However, saying my DD engineering college kid who earned $6000 in a summer job does not have to file a tax return is counter intuitive to me: she had taxes withheld & she will need to file for a tuition credit, so I think she will have to file. Or am I missing something here?

Our family income is low & we have to be careful not to fall off the lower ACA Obamacare cliff into Medicaid. Whether our DD's $6000 summer earnings count towards our ACA MAGI or not is an important detail.

Can anyone help me understand?

Many thanks,

newcollegeman
If your daughter is a full time student, under 24 years old and her earned income is less than 1/2 of her support, she won’t qualify for refundable education tax credit even if you choose not to claim her as a dependent.

In other words, you should claim her as a dependent and you COULD qualify for the education tax credit.

She can still file just to get her withholding back. Since she is not required to file, you won’t have to include her income in the household income for the PTC.

That appears to be a unintended consequence of the new tax law.

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newcollegeman
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Re: New ACA 2018 Dependent Income Rules?

Post by newcollegeman » Sat Nov 03, 2018 8:13 am

HueyLD,

You said: "Since she is not required to file, you won’t have to include her income in the household income for the PTC."

2 Questions:

1) Even if I don't have to, is it OK if I do include her income in the household income for the PTC?

2) What does PTC mean?

Many thanks,

Newcollegeman

theplayer11
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Re: New ACA 2018 Dependent Income Rules?

Post by theplayer11 » Sat Nov 03, 2018 8:36 am

rjsob58 wrote:
Sat Nov 03, 2018 7:12 am
This is making my head hurt. I am struggling to understand all this and the consequences of making a mistake are huge for me.

I'm trying to stay below the upper end of the ACA subsidy cliff. I have 2 teenage sons who both worked part time this year but neither made more than $12k. If I have to include them in my household MAGI, or more importantly if the ACA requires their income to be included, then it puts us right at or above the 400% FPL and I get $0 in subsidies. They will want to file taxes to get their withholdings back.

If they do file taxes, but make less than $12k each so are not REQUIRED to file taxes, are you saying I don't have to include their income in my household MAGI? :confused
When my kids worked summer jobs during college they marked "exempt" on their W4s and no income tax was withheld, thus no need to file a return to get that money back.

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HueyLD
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Re: New ACA 2018 Dependent Income Rules?

Post by HueyLD » Sat Nov 03, 2018 8:47 am

Q1: No. Here is what the IRS says in form 8962 instructions:

"Enter on line 2b the combined modified AGI for your dependents who are required to file an income tax return because their income meets the income tax return filing threshold. Use the worksheet next to figure these dependents’ combined modified AGI. Do not include the modified AGI of dependents who are filing a tax return only to claim a refund of tax withheld or estimated tax."

Q2: PTC stands for premium tax credit. That is the ACA premium subsidy you could receive by meeting their criteria.

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