Hi. First post here. DH (59) and I (55) retired 5 years ago and obtain our health coverage from Covered CA. Doing some planning for 2024. DD (21) is starting her last year of college and will graduate in June. She will be a tax dependent in 2024 and we expect that she will get a job with health benefits sometime after graduating, at which time she will no longer be on our Covered CA plan. I am not clear on how much of her income will be included in our household income for purposes of the premium tax credit reconciliation. Assume she earns $500 per month Jan-Jun while she is a student and she earns $5,000 per month Jul-Dec when she has employer coverage. How much would DH and I report on Form 8962 line 2b of DD's modified AGI? It appears that it would be DD's full year income if it comes from her 1040 line 11 which doesn't make sense since that includes income from her employment when she did not receive Covered CA coverage. Please set me straight.
Covered CA and college daughter
- Thread starter OCLife
- Start date
Following this since I have 2 sons in college, here in CA. Both are on my plan.
Here's what I assume I'll do - but could be completely wrong - looking for others to chime in...
Fill it out when you renew as if she wasn't graduating/getting more income in June.
In June, when she goes off your plan and starts earning real income, log onto covered ca and fill out the change in circumstance.
At tax time NEXT year - make sure she qualifies as a dependent for 2024. Since dependent is defined as earning less than 1/2 of their support. She probably won't qualify as a dependent if she starts out at 60k/year.
Congratulations on getting your daughter through school.
I'm facing a similar/but different situation this year. Older son worked enough hours that his mcjob started providing benefits... then when school got busy (22 units!) he dropped his hours to below the threshold... so he bounced off our plan, then back onto our plan. Very annoying from a tax and covered/ca hassle point of view. I think he'll qualify as a dependent... but will have to look at his earnings at the end of the year.
Here's what I assume I'll do - but could be completely wrong - looking for others to chime in...
Fill it out when you renew as if she wasn't graduating/getting more income in June.
In June, when she goes off your plan and starts earning real income, log onto covered ca and fill out the change in circumstance.
At tax time NEXT year - make sure she qualifies as a dependent for 2024. Since dependent is defined as earning less than 1/2 of their support. She probably won't qualify as a dependent if she starts out at 60k/year.
Congratulations on getting your daughter through school.
I'm facing a similar/but different situation this year. Older son worked enough hours that his mcjob started providing benefits... then when school got busy (22 units!) he dropped his hours to below the threshold... so he bounced off our plan, then back onto our plan. Very annoying from a tax and covered/ca hassle point of view. I think he'll qualify as a dependent... but will have to look at his earnings at the end of the year.
You will most likely need to do your and her 2024 tax returns both ways -- with and without her as a dependent -- to see what gives you the best overall result.
She is legally your dependent if:
- she is under 24 as of 12/31/24
- in school for at least part of 5 months in 2024
- she does not provide more than half of her own support for the year
- she lives with you (including the time she's away at school) for more than 183 days
This is where it gets tricky. Just because she earns money doesn't mean it counts as supporting herself. If she lives with you after she graduates and saves her earnings so she can afford to move out later, she's not supporting herself with her earnings. Also, whatever you pay towards college counts as your support. So as you can see, there are some ways to decide in advance how you'll apply funds if you do or don't want her to be your dependent next year.
If you do claim her as a dependent on your tax return, then yes, her entire income counts towards the household income. ACA subsidies are calculated annually, not monthly, so if she's your dependent, it doesn't matter whether she was on your plan for the full year or part of the year. Even if she weren't on your plan at all, you'd still have to include her income in the subsidy calculation.
If she is not your dependent for 2024, then she can still be on your ACA plan for all or part of the year. In that case, she will file her own tax return and you will have to go through the premium allocation process described in the instructions for form 8962. This is the "other" case where you just make an agreement with your daughter about what percentage of the premium belongs to you and what to her. The optimal division that maximizes the subsidy depends on each of your incomes, but you're free to give her 100% and you 0% or you 66% and her 33% or whatever division works best. Both of you have to file Form 8962 with your returns and report the other person's SSN on the form.
She is legally your dependent if:
- she is under 24 as of 12/31/24
- in school for at least part of 5 months in 2024
- she does not provide more than half of her own support for the year
- she lives with you (including the time she's away at school) for more than 183 days
This is where it gets tricky. Just because she earns money doesn't mean it counts as supporting herself. If she lives with you after she graduates and saves her earnings so she can afford to move out later, she's not supporting herself with her earnings. Also, whatever you pay towards college counts as your support. So as you can see, there are some ways to decide in advance how you'll apply funds if you do or don't want her to be your dependent next year.
If you do claim her as a dependent on your tax return, then yes, her entire income counts towards the household income. ACA subsidies are calculated annually, not monthly, so if she's your dependent, it doesn't matter whether she was on your plan for the full year or part of the year. Even if she weren't on your plan at all, you'd still have to include her income in the subsidy calculation.
If she is not your dependent for 2024, then she can still be on your ACA plan for all or part of the year. In that case, she will file her own tax return and you will have to go through the premium allocation process described in the instructions for form 8962. This is the "other" case where you just make an agreement with your daughter about what percentage of the premium belongs to you and what to her. The optimal division that maximizes the subsidy depends on each of your incomes, but you're free to give her 100% and you 0% or you 66% and her 33% or whatever division works best. Both of you have to file Form 8962 with your returns and report the other person's SSN on the form.
Thank you for the input. Sounds like even if DD legally qualifies as our tax dependent, we may want to elect to not claim her as a dependent.
For 2022, older DD was on our health plan but was not a tax dependent (turned 24 by year end), so I went through the premium allocation process (25% to her return since she was 1 of 4 people covered). Took 4 months to resolve our return and get our refund from the IRS and DD return is still not resolved. Would like to avoid that potential scenario with younger DD if she is on our health plan but not a tax dependent. Are there benefits to signing her up for an individual Covered Ca plan?
For 2022, older DD was on our health plan but was not a tax dependent (turned 24 by year end), so I went through the premium allocation process (25% to her return since she was 1 of 4 people covered). Took 4 months to resolve our return and get our refund from the IRS and DD return is still not resolved. Would like to avoid that potential scenario with younger DD if she is on our health plan but not a tax dependent. Are there benefits to signing her up for an individual Covered Ca plan?
It does take a long time to deal with returns where two tax families are using the same 1095-A. If this is the first time your older DD filed her own return, that might also be complicating things.
As for your younger daughter and whether she should opt for her own health plan, you'll have to do the math to see. If you know she's not going to be your dependent, then having her own health insurance will make the tax returns simpler. If she is your dependent then it makes your tax return a tiny bit harder because you have to combine the two 1095-A forms to fill out your 8962. Either way, it might actually end up costing more for her to have her own plan though. You can check by using the the Shop & Compare tool at coveredca.com. You'll be looking at 2023 prices if you do it now, but the answer as to whether it's cheaper to have one plan for all of you or two separate plans should be the same next year.
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