If you currently purchase your health insurance policy through your state's exchange and receive a subsidy, but are getting married later this year and will no longer qualify for a subsidy, you may be wondering how to minimize the potential tax impact of this change. Likewise, if you're currently ineligible for a subsidy but are marrying someone who earns substantially less than you do, you may soon find yourself eligible for cheaper insurance after becoming a legal spouse. The tax laws surrounding the Affordable Care Act (ACA) subsidy can be complicated, particularly when your marital status changes mid-year. Read on for some tips and guidance on this process.
What are some potential complications of marrying in the middle of a healthcare plan year?
Because you file your taxes under a certain status for the entire calendar year, if you get married on or before December 31, you'll need to file as "married filing jointly" or "married filing separately" the following April 15. Unfortunately, because your healthcare subsidy is based on your household income (currently 400 percent of the federal poverty level for your household size), any subsidy you've received for your ACA insurance premiums before your wedding may change after you're married and required to file your taxes together.
This means that if you've received a significant subsidy based on your income as a single person but will become ineligible for a subsidy once you get married, you'll be required to repay any subsidy received after you lost your eligibility. This repayment is usually assessed at the time you file your taxes for the previous year. As most couples aren't spending much time mulling over taxes or health insurance while making wedding plans, this can easily slip through the cracks and turn what you thought would be a nice tax refund into a hefty bill instead.
What should you do if you will need to repay your subsidy?
If you've already received a substantial amount in healthcare subsidies for the plan year and expect to be rendered ineligible for any subsidies once you get married, you may want to push back your wedding date until the next year, when you can decline any subsidies and start fresh.
However, if you choose to keep a wedding date that may require you to repay a portion of your annual subsidy, you'll want to be proactive. Contact the IRS and your healthcare provider to ensure that you have an accurate picture of how much you'll be required to repay, and make quarterly payments toward this amount if you can (before you file your taxes). This can help lower the amount due and minimize any penalty that might otherwise be assessed.
For further assistance, contact a professional tax preparation service, such as can be found from Groskreutz, Schmidt, Abraham, Eshleman & Gerretse CPA.