STUMP » Articles » Obamacare Watch: 30 Jan 2014 — The Divorce Bonus for Premium Subsidies » 30 January 2014, 04:20

Where Stu & MP spout off about everything.

Obamacare Watch: 30 Jan 2014 — The Divorce Bonus for Premium Subsidies  


30 January 2014, 04:20

It looks like some people are discovering the incentive to divorce in Obamacare:

What happens with premium tax credits if a couple gets divorced? If the premium tax credit is based on the previous year’s income when the couple filed taxes jointly, many wouldn’t qualify. But once someone is divorced, one individual might have little income. What is the subsidy based on in that situation?

If a couple divorces, each person’s eligibility for premium tax credits will generally be based on his or her own annual income. The former spouse’s income won’t be counted, even if the couple filed taxes jointly the previous year.

Premium tax credits are available to people with incomes up to 400 percent of the 2013 federal poverty level ($45,960 for an individual).

During the application process, people are asked to project their income for the year. If someone estimates income that’s more than 10 percent lower than the previous year’s taxes or wage information or Social Security data would suggest, the system will flag it.

At tax time next year, the Internal Revenue Service will reconcile an individual or family’s actual income against the amount that was projected. People who received too much in tax credits may have to repay some or all of it.

The situation may be different for couples that are separated but not yet divorced, however. If each files taxes as “married filing separately” neither will be eligible for premium tax credits on the exchange.

They don’t note that the subsidy cut-off point is such that a married couple is outright penalized for being married — the federal poverty limit for a couple is less than twice the FPL for a single person. Indeed, it’s only 35% greater — far from 100% greater. But health premiums for a couple are twice that of a single person (i.e., a 100% increase over a single person rate).

So two people who singly could qualify for some rather hefty premium subsidies may qualify for zero subsidies as a married couple.

I explained that back in August. -this currently links to its page – Admin.

How’s that for income inequality, Obama?


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