Applying to The Health Insurance Marketplace With Children


The IRS allows children to remain on their parent’s health insurance until the age of 26. They can also be claimed as dependent on their parents’ return if under the age of 24 and a full-time student. In most cases, there are no issues when the parents’ insurance plan is a private health plan or through an employer. But what happens when the parents are in the health insurance marketplace?

Many taxpayers are not well informed on how this situation impacts the filing of their tax returns, as well as the tax returns of any covered individuals under the health plan. Remember that when you apply for marketplace coverage, you are asked to estimate the income for “all covered individuals,” because the premium tax credit follows the tax household. Let me repeat that. The tax credit follows the tax household. So, if your children have to file their own tax returns, you have to account for their actual modified adjusted gross income (“MAGI”) on your tax return.

One of the recommendations I make to clients that the marketplace does not always make clear is that for covered individuals who are not claimed as dependents anymore, that they should apply separately for a marketplace plan, so their income and premium tax credit reconciliation can be handled cleanly.

But what do you do in the case where you are not claimed as a dependent, but you are covered under your parents’ marketplace policy? In January, your parents will receive a 1095-A which is used to report the premium paid and help prepare the Premium Tax Credit (“PTC”) reconciliation form that is filed with the tax return. The IRS reconciles the actual income reported to the estimated income when applying for the subsidy, and any differences will be reported as either an additional tax or a refund on the tax return. Covered children will not receive a separate 1095-A. They will have to report it on their returns, but this is where the fun begins. Filers must complete the Shared Policy Allocation Worksheet on Form 8962 when there are covered individuals not on the tax return. You then have to allocate the PTC between all of the taxpayers so the IRS can reconcile the actual income and allocate the PTC to the proper taxpayers. You can allocate any percentage between 0% and 100%, but you have to ensure you complete this worksheet, or else one or all of the covered individuals may receive tax notices for not properly reconciling the PTC.

This gets a bit complicated for most taxpayers, which is why I recommend that in these special cases, have your non-dependent child apply for their own health marketplace coverage. You’ll be glad you did.

When it comes to taxes, there are a lot of questions that can come up. And it’s not always easy to find the answers yourself. That’s where our tax experts come in. They’re licensed and they know the ins and outs of the tax code. So whether you’re looking for help with your personal taxes or your business taxes, they can answer all your questions. For further assistance, call us today at 404-900-1040 or schedule an appointment now.

Al Meyers, CPA, MBA
Senior Associate

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