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MFS spouse repaying subsidized health insurance

I'm wondering if there is a loophole in the rules for paying back health insurance subsidies, or more likely, if I'm tripped up by my incomplete understanding of the topic:

Suppose that a married woman with little to no income of her own buys marketplace insurance for herself only (perhaps her spouse is eligible for VA care). For whatever reason, even though her husband makes a lot of money, she enters a low household income that qualifies her for advance payment of the premium tax credit (APTC).

If they were to file MFJ after the end of the year as usual, they would have to repay all the APTC that the government paid to the insurer during the year, because of the husband's high income.

If they file MFS the woman would ordinarily have to repay the APTC, because regardless of income MFS taxpayers aren't eligible for the premium tax credit. However, people with incomes less than 200% of the poverty line (assume this is not a community property state) don't have to repay any APTC except $600. Therefore the couple got subsidized for health insurance despite their high joint income, and is out only $600, plus what they lose by filing MFS instead of MFJ.

Am I missing something, or do the instructions not capture all the nuance of the code, or is it really possible for a high income couple to get subsidies and avoid repaying much of them in this manner (subject to the MFS "penalty")?

Thanks, Ed

Reply to
Ed Roberts Jr
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Your analysis (repaying only $600 of the APTC because of the low income of the MFS filer) appears consistent with Form 8962 and the Instructions. The logic of Form 8962/Instructions concludes that the entire APTC is an excess payment but that the amount of repayment is still subject to the repayment limitation. Whether this result is consistent with the underlying law is something I don't have an opinion on.

I would note that a Married person applying for the APTC attests during the APTC application process that they will file a MFJ return. If this loophole is taken advantage of for multiple years, the attestation may be seen as obviously fraudulent and that has the potential to cause problems.

Reply to
BignTall

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You're missing something. There is no allowed PTC if MFS (and neither exception applies) or if MAGI exceeds 400% of the poverty line. The $600 (more or less) repayment limit only applies if taxpayer is eligible for _some_ subsidy, either PTC or Medicaid.

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

Reply to
Arthur Rubin

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