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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Son to File Taxes as Dependent or Not?

By on | 4 Comments

Question: My 21 year old son was added to our #CoveredCalifornia account with a start date of 9/1/16. He made $12,000 during the last 4 months of 2016. We are having issues with him stating that he is going to claim himself. Which do you think would be the harder hit, taking the $12,000 overage on our income for the year or covering him for 4 months and not claiming him.

Answer: My original answer to this question was wrong. This is the corrected answer. Explain this to your son. If he claims himself, his taxable income will be $12,000 minus his standard deduction of $6,300 minus the personal exemption of $4,050 for a net taxable income of $1,650 resulting in a $165 tax liability. If you claim him as a dependent, he loses the exemption so his taxable income will be $12,000 minus his standard deduction of $6,300 for a net taxable income of $5,700 resulting in a $570 tax liability. So basically, your son will lose $405 if you claim him. However, the tax benefit to you, the parents, will probably be more than $405 because you are probably in a higher tax bracket. I am unable to compute the financial consequences in your 2016 Covered California account without more demographic info. Send another question with your email address, zipcode, ages of family members and income by member and I will be more specific. In 2017, you should no longer claim your son as a dependent. Thank you Ernest for providing this answer.

4 Comments

Yes Kris. Your son’s income is included in your family income.

My question if I take my son into my family plan with covered California, do I need to add his income to the family annual income ? He is full time student and earn less than 1000 monthly

Ernest, Thank you for the correction. I will correct the original post. Reminded again, insurance brokers shouldn’t be giving tax advice :)

I’d like to clarify the tax impact on this scenario. The $4050 exemption is a deduction, not a credit. If the son claims himself, his taxable income will be $12,000 minus his standard deduction of $6300 minus the exemption of $4050 for a net taxable income of $1650 resulting in a $165 tax liability.

If the parents claim him as a dependent, he loses the exemption so his taxable income will be $12,000 minus his standard deduction of $6300 for a net taxable income of $5700 resulting in a $570 tax liability.

So basically, the son will lose $405 if his parents claim him. However, the tax benefit to the parents will probably be more than $405 because they are probably in a higher tax bracket.

This is just the tax impact, you still need to consider the impact on covered ca.

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