Q. My son lives in our yard in a broken-down RV. He’s been unable to find steady work for many years. His only income is from an occasional odd job. We claim him as a dependent on our taxes. How does this all work with the new health care law?
A. Sadly I’ve gotten several inquiries like this recently – the 52-year-old woman who lives with her parents and has been unemployed for years; the 28-year-old woman who’s moved in with her mother while attending community college.
For families in this situation, there’s sort of good news, but with some significant asterisks, according to experts on taxes and the health law that I consulted.
It starts with tax filing status, which is very important because it’s the basis for handing out premium tax credits to buy insurance on your state’s Health Insurance Marketplace. Parents who support adult children over the age of 24 (or, for that matter, any relative), can list them as dependents on their tax return. It’s a category called “qualifying relative” and here are the, um, qualifications
- The adult child must be single, not disabled, not pregnant, and not have any dependent children.
- His or her gross income for 2014 must be no more than $3,950.
- The parent or parents must provide more than half the adult child’s support, including food, housing, health care, clothing, transportation, utilities, and entertainment. (The IRS provides a worksheet for figuring all this out.)
If this is your situation, your adult child can purchase health insurance on the marketplace and possibly get a premium tax credit to lower the cost based on your total household income. You read that right. Even though you may be on Medicare and have no need for other insurance, your son’s marketplace financial help is based on the total Modified Adjusted Gross Income of everyone in the “tax filing unit,” aka your household. (Not sure how to count income? Read our explainer.)