My daughter is working part time and going back to school and thus qualifies for rather hefty subsidies under Affordable Care Act. She is about to get an inheritance of $16,000-20,000 and was wondering if that would count in figuring up is she owed taxes, etc. at the end of the year.
Inheritances and gifts are generally not included in taxable income, unless they come from an IRA or other qualified plan for which income tax had not yet been paid by the donor.
As far as the Affordable Care Act, my recollection is that subsidies are based on taxable income, not on accumulated assets.
Thanks.
The Premium Tax Credit (the subsidy) is based on Household Income which is Modified AGI. Modified AGI is AGI plus any excluded foreign earned income, tax-exempt interest and any social security benefit that is not already included in AGI. SO... for someone who is single and not collecting social security nor earning any compensation from a foreign source, it is AGI plus any tax-exempt interest.
As Stuart said, the inheritance would only be included in AGI if it had its source from a retirement plan or annuity that would have been taxable to the decedent had the decedent taken the distribution.
Thanks. This is out of a trust that my Dad left the kids when he died about 28 years ago. My step-mom got the income until she died (which was last week), so there shouldn't be any taxes for the decedent.
A liquidating distribution from a trust, (particularly one that old) may include some capital gains which may be taxable to your daughter and possibly reduce her health insurance subsidy. It is also possible that the trust could receive some other income after the step-mom died (i.e. dividends, interest) that would be allocated to your daughter.
The trust should eventually send her a form K-1 (just like they did to the step-mom for the last 28 years) with all the capital gains and income information needed to calculate taxes but that may not happen until next spring. If you want to get estimates of capital gains and income amounts before then, you will need to ask the trustee of the trust. The trustee may or may not be willing and able to help.
Condolences and Best Wishes.
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