Thursday, September 18, 2014

Obamacare, Affordable Care Act and Married Filing Separately - Warning

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If you are receiving an Affordable Care Act subsidy (called the Premium Tax Credit), Married Filing Separately (MFS) is NOT an option for you.  With only one exception (domestic abuse, discussed later under Note 1) if you file MFS, you are ineligible for the Premium Tax Credit, and will have to pay your half of the subsidy back when you file taxes (the person you are married to pays the other half, unless you received all the subsidy on your own in which case you pay it all back.

You need to pay attention to this as the end of the year approaches.  If you are not divorced or LEGALLY separated as of December 31st, 2014, you are married for tax purposes, and your only choice for filing status is Married Filing Jointly (MFJ), MFS or (under a difficult to meet standard - see Note 2 below) Head of Household (HH).  If you can't file MFJ in this case, and don't meet the requirements for HH, you will have to pay back the subsidy (subject to limits based on income - but you'll pay some or all of it back).

Keep this in mind when considering changing your marital status, whether through divorce, marriage or separation toward the end of this year.  Also take it into account when deciding how to file with your soon to be ex-spouse.

Note 1 - If you are forced to file MFS due to domestic abuse, you have to meet the following requirements, and indicate that you meet them on the tax return to avoid the repayment: You must be forced into filing MFS due to domestic abuse (unable to file MFJ) and you must be living apart from your spouse at the time you file the tax return.

Note 2 - Make sure to research this if you think this applies, what follows is just the bare bones and there are lots of tricky parts.  If you are married at the end of 2014, but live apart from your spouse for the last 6 months of the year and payed more than 50% of the cost of maintaining a home for you and your dependent child you might be able to file HH by being considered unmarried for tax purposes.

If you want more than just tax information on the Affordable Care Act, check this book out:

Affordable Care Act For Dummies

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