ACA Health Insurance for Dependents: Navigating Coverage and Tax Implications

Health insurance is an essential aspect of financial well-being, and the Affordable Care Act (ACA) has made significant strides in expanding access to affordable health coverage for millions of Americans. For dependents, understanding their health insurance options and tax implications is crucial to ensure they receive the necessary protection without facing unnecessary financial burdens.

ACA Marketplace Coverage for Dependents

The ACA established Health Insurance Marketplaces, where individuals and families can compare and purchase health insurance plans that meet minimum coverage standards. Dependents can be added to a parent’s Marketplace plan up to age 26, regardless of their income or employment status.

Tax Implications for Dependents on Marketplace Plans

When tax filing season approaches, dependents need to be aware of the potential tax implications of being covered by a Marketplace plan. One common question is whether they need to report that they purchased health insurance through the Marketplace.

The answer depends on whether the dependent purchased the insurance themselves or was covered on a parent’s plan. If the dependent did not purchase the insurance but was covered by a Marketplace plan, they should answer “yes” to the question on their tax return asking if they purchased health insurance through the Marketplace.

Form 8962: Allocation of Premium Tax Credit

If the dependent received Advance Premium Tax Credit (APTC) to help pay for their health insurance, they will need to complete Form 8962 to allocate the credit among themselves and their parents. APTC is a tax credit that helps lower the cost of health insurance for eligible individuals and families.

Step 1: Determine the amount of APTC received and the months the coverage was in effect.
Step 2: Calculate the percentage of time the dependent was covered on the Marketplace plan compared to their parents’ plan.
Step 3: Allocate the APTC based on the percentage calculated in Step 2.

Seeking Professional Help

If dependents are unsure how to complete Form 8962 or have other questions about their health insurance coverage or tax implications, it is highly recommended to consult with a licensed insurance agent or tax professional. They can provide guidance and ensure that dependents are meeting their reporting obligations and accessing the benefits they are entitled to.