Can Claiming a Dependent Affect Their ACA Insurance?

Dependent Care Tax Credit Explained

The dependent care tax credit offers a tax break to individuals who provide care for a qualifying dependent, such as an elderly or disabled parent. This credit is claimed on your tax return, and it can reduce your tax liability.

Impact on ACA Subsidies

If you claim a dependent with ACA insurance, their subsidy will be based on your household income, not just their own. This is because the premium tax credit, which reduces the cost of ACA health insurance, is calculated based on modified adjusted gross income (MAGI). MAGI includes all income, including Social Security income.

For example, if your mother has no income other than Social Security death benefits, and you claim her as a dependent, her ACA subsidy will be based on your income level. If your income is too high, she may not qualify for a subsidy at all.

Factors to Consider

Before claiming a dependent with ACA insurance, consider the following factors:

– Your income level: If your income is too high, claiming a dependent could reduce or eliminate their ACA subsidy.
– The cost of their insurance plan: The cost of your mother’s ACA plan may be different if she is claimed as a dependent. Use to estimate how her premiums would change.
– Your overall tax savings: The amount of tax savings you receive from the dependent care tax credit should be weighed against the potential loss of ACA subsidy for your mother.

Seeking Professional Help

If you need assistance determining whether claiming a dependent will impact their ACA insurance, consider contacting a licensed insurance agent or tax advisor. They can provide personalized guidance based on your specific situation.

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