Obamacare FAQ: Determining Your Family Size

Family size of four? Only your federal tax return knows for sure. (Mikey G Ottawa/Flickr)

Family size of four? Only your federal tax return knows for sure. (Mikey G Ottawa/Flickr)

Editor’s note: For people buying on the individual market who want health insurance starting Jan. 1, the deadline to sign up is Monday, Dec. 23. We are running one post a day with questions and answers on the Affordable Care Act and Covered California until that deadline. Readers can also consult KQED’s Obamacare Guide, written specifically for Californians.

By Emily BazarCHCF Center for Health Reporting

Q: I have been on the Covered California website and the calculator asks for family size, which I presume means the taxpayer plus number of dependents claimed on federal tax forms. If a consumer claims non-child family members (like aging parents) do they count as part of family size?

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 and 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.

Yay.

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.

Q: I am on Medicare and my wife, who is 61 and not yet eligible for Medicare, will soon be unemployed. … The tax credit through Covered California is based on “household income.” Currently, we file a joint tax return. But suppose we decide to file separately. How is household income then calculated? Without my income, she would be eligible for a much larger tax credit.

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.

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