How Married People Filing Separately Can Qualify for the Premium Tax Credit

Generally, a married taxpayer filing separately (MFS) who does not qualify as a victim of domestic abuse or spousal abandonment cannot take the premium tax credit (PTC) and thus must repay all advance premium tax credit (APTC) received (Sec 36B(c)(1)(C)). However, when an individual has obtained insurance through the marketplace, received APTC, and subsequently files as MFS, the amount of APTC that must be paid back may be limited based on the taxpayer’s household income relative to the federal poverty level (Sec 36B(f)(2)(B)(i)). The maximum payback for a MFS with an income expressed as a percentage of the federal poverty level is:

Percent of the Federal Poverty               Maximum Payback
Less than 200%                                                    $   600
At least 200% but less than 300%                        $1,500
At least 300% but less than 400%                        $2,500

This exception effectively allows MFS taxpayers to obtain some amount of the PTC when they have obtained insurance through the marketplace and are not offered affordable insurance by their employers. In addition, MFS spouses are splitting their incomes by filing separately, thus reducing their individual household incomes and potentially dropping them into a lower poverty level. This, in turn, can reduce the amount of APTC they have to pay back.

August 24, 2016 by Lee Reams Sr.
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