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Retirement Planning > Social Security

The marriage penalty

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Eddie works in a thrift store, and earns just enough to put him a little above the federal poverty limit for a single taxpayer.

One of the people for whom the Patient Protection and Affordable Care Act (PPACA) was intended, he signed up early in 2014, and received a $680 per month “silver” plan for which he paid only $45 out of pocket.

On Dec. 27, Eddie married Jan, a disabled widow he met at work.

See also: What is PPACA World like? Anthem and Humana open up

Jan is a few years older than Eddie, collects Social Security, and is covered by Medicare. As part of the process of starting his new life, and encouraged by the sense of economic security provided by affordable health insurance, late in November Eddie negotiated the settlement of an outstanding credit obligation. He started 2015 a very happy man.

Then he tried to file his taxes.

First, he discovered that the “write-off” portion of his credit settlement was counted as “income,” although he had actually received none. According to PPACA, Eddie’s increased adjusted gross income (AGI) meant he would have to pay “back” (a term Eddie could not understand, since he had never received that money, either) $1,100 of premium tax credits advanced on his behalf.

The issue that hurt the most, however, was Jan’s Social Security benefit, which totaled more than $18,000. Although that money is not subject to federal income tax, PPACA counts it as income in calculating premium tax credit eligibility. Added to everything else, it just about eliminated all of Eddie’s credits.

It took several trips through the instructions for Form 8962 and IRS Publication 974 to discover and implement the “Alternative Calculation for Year of Marriage,” which effectively nullified the penalty for 2014.

However, Eddie still had to return $1,100 of his 2014 advance premium tax credit, and now pays and additional $100 per month for his insurance plan.

That’s the penalty for marrying a Social Security beneficiary on Medicare.

See also: View: Oregon shows Obamacare remaking insurance market


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