The passage of the Affordable Care Act (ACA), also known as ObamaCare, created Marketplaces in each state where Americans can buy insurance. In addition, citizens may qualify for financial assistance with monthly premiums and possible cost-sharing, such as copayments and deductibles. In order to qualify, household size and income must be reported when filling out the application.
Reporting Household Size
The first thing to consider when filling out the Marketplace application is correctly reporting your household size. When filling out the application, be sure to include yourself, your spouse, and your children who live with you. Children should be reported even if they make enough money to file their own income tax return.
You should also include anyone you claim as a dependent on your tax return, including those who do not live with you. In addition, anyone under 21 who you take care of and lives with you should be reported.
Some family members, such as unmarried partners, should only be reported in special circumstances. An unmarried partner should be reported only if one or both of these conditions apply: they are a dependent on your taxes or they are the parent of your child. You unmarried partner’s children should not be reported unless they are your dependents. Other relatives, including parents, who live with you and file their own tax returns should not be reported.
When reporting your annual household income, it’s important to know what income sources should be included and which should not. You should estimate the income for the following year – for instance, during the 2014-2015 enrollment period, you’ll be estimating your 2015 income.
You should include income for yourself, your spouse, and any dependents who make enough money to be required to file a tax return. The types of income that must be reported are:
- Wages and Salaries
- Net self-employment income
- Unemployment and Social Security payments, but not SSI
The following types of income do not need to be reported:
- Child support
- SSI or Veteran’s disability payments
- Worker’s compensation
- Proceeds from loans such as student loans, bank loans, or home equity loans
- Any income that an employer removes as pre-tax deductions, such as health insurance costs or retirement deductions
Changes in Household Size or Income
On occasion, you will find that the estimate for your household size or income turns out to be incorrect. If your household size changes or your income is higher or lower than expected, your premium tax credit will be different than estimated on your application. It is important to report changes in household size or income to the Marketplace as soon as possible, so that the amount of your premium tax credit can be adjusted.
If you have additional members join the household or you make less money than expected, the premium tax credit you qualify for could be higher. Unless you notify the Marketplace of this change during the year, that amount will be paid to you on your tax return when you file your taxes, rather than being adjusted mid-year.
If you have fewer members than expected in the household, or make more money than you estimated, you could end up with a lower tax credit than you were originally awarded. If this happens, you will want to notify the Marketplace as soon as possible, so that your premium tax credit can be adjusted. You may want to start saving money if possible, as you will be charged the difference on your tax return when you file your taxes.
As the next open enrollment period approaches on November 15, 2014, it’s important to be prepared to fill out an application or update your previous one. Correctly reporting household size and income, and notifying the Marketplace of any changes in your estimates, is an important way to make sure your tax credit is correct throughout the year and you don’t find yourself surprised at tax time.