My broke adult child lives with me and needs health insurance. Can he get it?

Yes, but there are complications

Published: October 07, 2013 04:53 PM

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.)

Health reform countdown: We are doing an article a day on the new health care law until Jan. 1, 2014, when it takes full effect. (Read the previous posts in the series.) To get health insurance advice tailored to your situation, use our Health Law Helper.

Here's where it gets tricky, according to Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Services. If your income is high enough, and your son young enough, his premiums may be so low that he won't obtain any tax credit even if your income technically qualifies. (It has to do with the complicated way that marketplaces calculate tax credits. Trust me, you don't need to know the details right this minute.)

"This is going to give people ulcers," Haile said. "Let's say they decide they can't afford insurance for junior. If they claim him as a dependent, or even if they could have claimed him but didn't, they are liable for the tax penalty if he is not insured."

Things get even dicier if you live in a state that's expanding Medicaid to provide free or nearly-free coverage to people like your financially distressed adult offspring. Because you're technically obliged to claim him as your dependent on your tax return, he shouldn't even think about applying separately for Medicaid.

But "he could qualify if he thinks or represents that mom and dad won't claim him as a dependent," Haile said, and if he's in his 40s, the state might not check. It's a grey area, to say the least.

  Nancy Metcalf

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