Is My Son a Qualified Dependent?

If his gross income (which includes unemployment income, if he qualifies for unemployment) is less than $4000, and you supply over half of his support, you can claim him as a dependent.

Regardless of support tests, you need not file a gift tax return for payments made directly to medical providers or insurers. If you supply over half of his support, regardless of his income, you can claim such payments as _your_ medical expenses.

-- Arthur L. Rubin CRTP, AFSP, in Brea, CA

Your son is not your qualifying child because of his age. He can be your qualifying relative if his taxable gross income was less than than the amount of the personal exemption ($4000 in 2015). If he passes the gross income test you can claim the dependency exemption and you can deduct his medical expenses that you paid. If he fails the test because of his income, he is not your dependent but you may still deduct the medical expenses you paid for him.

Also note that if he is your dependent, you were responsible for obtaining minimum essential health insurance for him in 2015. Additionally, if he was required to file a tax return (dependents have different filing requirements) then his income would be included with your income for the purpose of eitherbcalculating the penalty for not having minimum essential health insurance for anyone in the tax family or you had to reconcile the premium tax credit because someone in the tax family purchased insurance from either the federal or a state health insurance exchange.

Alan wrote in news:n7gpam$hb$ snipped-for-privacy@dont-email.me:

He earned substantially under $4000.

If he fails the

Hmmm...If he passes all the dependency tests, MUST I claim him as my dependent? Yes, this may be a dumb question.

Oh, I didn't know that about the ACA.

My wife and I were covered under my COBRA for all of 2015. It was too expensive to include my son on my COBRA, so we went to the marketplace for my son. In January of 2015, my son thought he was just about to get a job earning a certain amount per year, and based on that amount, we got him coverage through the exchange that had a subsidy. The job never materialized, and we paid his insurance all year.

He found work just last week, and we renewed his insurance through the exchange.

When we talked with the exchange navigator for the 2016 renewal, we were told that he has to file a return (they do not know about his low earnings). I suspect he has to file a return, regardless of income, so that he can check off "yes", I was insured in 2015, for whatever months he was insured (it was all of 2015).

I would like to get as much of a tax break as allowed. If I claim him as a dependent, then he cannot claim himself on his own return. That's fine with me, but I wonder if there are any issues that may arise because the policy he had last year was based on an estimated earnings that never happened. Last thing I want is to be tangled up in a tax mess, no matter how small.

At the least, it looks like even if I don't claim him as a dependent, I can claim his insurance costs that I did pay. By the way, can you direct me to the reference for this?

Thank you.

1. If he is your dependent, then only you can claim the dependency exemption. If you forgo claiming it, he can not claim it for himself.
2. Anyone who purchased insurance from the marketplace and accepted the advanced Premium Tax Credit (the subsidy that reduced the insurance premium) needs to file to reconcile the credit.
3. It sounds as though he was your dependent and as I previously mentioned, you were responsible for obtaining health insurance for him.
4. The reconciliation of the advanced credit takes place on your tax return that will list him as your dependent.
5. It is possible that there could be more credit (actual income lower than estimated triggering a refund) or less credit (actual income higher than estimate triggering a tax payment).
6. The way the system was designed.... as your dependent in 2015, you should have given the health exchange the household income for the tax family. This would have been you, your spouse and your dependent if he had a filing requirement. Based on your comments, he would not have a filing requirement unless his unearned income was over 50. A dependent is not entitled to the Premium Tax Credit. That goes to the taxpayer who claims the dependent.
7. Your 2015 return would include him as your dependent and you would enter the information from his Form 1095-A onto your IRS Form 8962.

Publication 502, in the section Whose Medical Expenses Can You Include? / Dependent

2015,

as a dependent on someone else's 2015 return.

-- Arthur Rubin CRTP, AFSP, in Brea, CA

Alan wrote in news:n7mib8$ia4$ snipped-for-privacy@dont-email.me:

Ah, yes, there it is on 1040 line 6a.

Yes, and that's either all of us as a tax household, or just me and my wife as one unit, and he as his own unit.

You're right. When he went to the market place, he didn't know that he would not be working all year long, and end up my dependent. What a mess this ACA has caused.

OK.

I will have to figure our taxes with him as a dependent, and see. My fear is that the IRS/ACA will say that since he earned nothing, or so close to nothing, that he was required to go with Medical, and you owe us all the subsidies back.

He has no unearned income. A

Yes.

I will try this and see what the results are.

QUESTION: He has no unearned income, so as you say, he has no filing requirement, but you say above "his Form 1095-A", does that mean he does have a filing requirement, or simply that his name goes on this Form

1095-A, and attached to our return?

My wife and I did read all the information/instructions about purchasing insurance through the marketplace, and we did understand them, even about returning subsidies, but the monkey wrence was when my son never worked all year.

On 1/21/16 11:15 AM, Boris wrote: [SNIP]

No. You already determined that he is your dependent as a qualifying relative. As such, your tax family has three people and the health coverage family has 3 people. You will complete Form 8962 on your joint return.

You definitely will owe all of the the advanced credit back if your household income (you and your spouse as it appears that your son's income did not require that he file a tax return) for the tax family reaches 401% of the federal poverty level for a three person family.

When you complete Form 8962, the data for the bottom half of the form will come from his 1095-A as it was only he who purchased insurance from the marketplace. You do not send the 1095-A to the IRS with your tax form.

This is not necessarily a "monkey wrench". Whether or not he should have received an advanced tax credit is determined by your household income's relationship to a 3 person family federal poverty level. Your household income does not include his income as he had no filing requirement. If he had made enough unearned income to have to file but his total income was under $4000, he would still be your dependent but his income would be included with yours to arrive at household income. The higher the income, the lower the subsidy.

I concur with the others that your (tax year 2015) 24-year-old son is your dependent and that you were (or ended up being) responsible for providing his health insurance for 2015. Whatever you pay for him is deductible under Sch A, medical expenses.

I agree with Alan that if your household income (you and your spouse's income + your son's income) is 400% or more of the federal poverty level, you will have to repay the entire advance premium tax credit for your son's marketplace insurance. Like others here, I am trained as an IRS Volunteer Income Tax Assistant/Tax Aide. I ran your numbers at taxwise.com, for more experience. Here's what I found:

If you do not live in Alaska or Hawaii, the federal poverty level (FPL) is an income of $19,790 for a family of three. If your income is 100% of the FPL, then you will not own any of the advance premium tax credit (APTC) back. For higher incomes:

150% of FPL => repayment is capped at $600 200% => repayment is capped at $1500 250% => repayment is capped at $1500 300% => repayment is capped at $2500 350% => repayment is capped at $2500 400% => you repay all of the APTC

Form 1095-A should be downloadable now at healthcare.gov. I downloaded mine over a week ago. Naturally it has an enormous error that has to be fixed or the IRS may come after me, claiming I had no coverage for four months of the year. My local health insurer assures me they are wrong and use my billing statements as needed.

At this point I have the impression that it is better to underestimate, by a lot, one's income for purposes of marketplace insurance. Why? Because of the cap limits above, for one. Also if one has non-refundable tax credits, this may cover any charges imposed on Form 1040 Line 46, repayment.

I presume somewhere in the IRS code there's some penalty for regularly underestimating one's income? I am aware one signs the marketplace application under penalty of perjury yada. Someone can lecture me on the perils of deception and trying to game the Affordable Care Act.

Meanwhile, though I was a fan of the ACA, I find that comparing plans is a nightmare; I do not know what I will have to pay for services; preventive services supposedly fully covered are often met with health care providers who tag on extra services they claim are mandatory before the preventive service is administered; healthcare.gov is full of bugs that have cost me numerous phone calls and time over many months (just to get my address right, for one); the federal reps give incorrect information (like Boris related); and predicting what I will owe for my health insurance is difficult. That the system may possibly be gamed as I describe above is troubling. What do I say to clients who come in for their free tax preparation this year? Lots of empathy, and try to follow the law.