MFS and ACA

[fredazcpa]

Husband is retired on SS and medicare, so he is good for health insurance .  Wife lost her job about 18 months ago, also with that her health insurnance.  Currently and all of 2014 no health insurance.  she is 10 years younger than husband.

 

If they file MFS, does that mean husband does not pay the penalty, his income is income is about 65K

 

she would file on the small unemployment that she has rec'd

 

thank you for your help

 

[Terry D EA]

Your scenario won't work due to the household income rules and calculations. The statement below is from the IRS description of household income and whose income to include.

 

For most people, a household consists of the tax filers and their tax dependents.

 

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the adjusted gross incomes of all of your dependents who are required to file tax returns.

[fredazcpa]

Your scenario won't work due to the household income rules and calculations. The statement below is from the IRS description of household income and whose income to include.

 

For most people, a household consists of the tax filers and their tax dependents.

 

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the adjusted gross incomes of all of your dependents who are required to file tax returns.

that is what I was getting as well, thank you for confirming it for me

[Pacun]

Wife is not a dependent when she files her own return or ever.

[Terry D EA]

No one said the wife was a dependent. "For most people, a household consists of the tax filers and their tax dependents." In the original post the wife would be filing her own return which makes her a filer in the above statement and therefore her income is figured in household income.

[Pacun]

Household means ONLY the persons included on your 1040. So, it would work what the original poster said about the wife not being hit with a huge penalty if using only her income.

[jklcpa]

I agree, and from what the OP wrote, wife will file because of the unemployment income, but her penalty for lack of insurance will either be much lower or eliminated entirely.

Run the returns both ways because filing MFJ even with the penalty included may still give the overall lower tax compared to each filing MFS.  The OP didn't provide enough info about the return to make that determination.

[Cathy]

Just remember that 100% of a taxpayer's social security is taxable if MFS and lived with spouse the entire year. The husband in this case would pay tax on his entire ss. That might eliminate any savings on the wife's penalty for no health insurance and filing separately.