Q&A: Claiming an adult child as a dependent

Dear Liz: I am paying rent for my adult son in another state. He gets occasional help from various services, but if I don’t want him to sleep on the street, I have to pay his rent and send some emergency food. I don’t see this changing. Can I claim him as a dependent or would that make me responsible for his health insurance, which I cannot afford?

Answer: Yes, you would be responsible for your son’s health insurance coverage if you claimed him as a dependent, said Carolyn McClanahan, a certified financial planner with Life Planning Partners in Jacksonville, Fla. That would mean either paying for coverage or paying the fine for not having coverage. The fine for 2016 is $695 per adult or 2.5% of your household adjusted gross income, whichever is greater. The penalty is capped at $2,085, which is likely much more than what you’d save with an additional exemption. If you’re in the 25% tax bracket, a $4,050 personal exemption is worth a little over $1,000.

The IRS has many rules about dependents, and standards for claiming adult children are much higher when they’re over 19 (or over 24 for full-time students). To qualify, your son would have to earn less than the amount of the personal exemption ($4,050 in 2016) and you must have provided more than half of his support, among other rules. The IRS has an interactive tool to help people determine dependents’ eligibility at https://www.irs.gov/uac/who-can-i-claim-as-a-dependent.

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Q&A: Health insurance subsidies

Dear Liz: We’re living on a very tight budget and often have to put groceries and unexpected expenses on a credit card that’s in my husband’s name only. I have no personal income. My husband is on Medicare, but I’m too young to qualify and need to find low- or no-cost healthcare, (I haven’t had any insurance since 2007.) They are using my husband’s total income and coming up with high rates that are supposed to be lowered by tax credit, but we don’t pay income tax because our income is too low. Should they be using what the IRS considers our income to be? Or could I apply using my zero personal income?

Answer:
By “they,” you presumably mean a health insurance marketplace where you shopped for policies offered by private insurers. HealthCare.gov is the federal marketplace and many states, including California, offer their own. When you shop for a policy through a marketplace, you can qualify for subsidies that can dramatically lower the cost of your coverage.

This subsidy, also known as a premium tax credit, is based on your household income, not your individual income. The tax credit is refundable, which means you get it whether or not you owe federal income taxes, and you can opt to have the subsidy paid in advance to the health insurer to lower your premiums. You don’t have to wait until you file your taxes to get the money back.

You’ll want to act quickly, though, because the penalty for not having coverage is rising. The penalty for 2016 is the greater of $695 per adult or 2.5% of income. You still have a short window to avoid that hit: The enrollment deadline is Jan. 31.

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