How a divorce can boost health insurance subsidies

What happens with premium tax credits if a couple gets divorced? If the premium tax credit is based on the previous year’s income when the couple filed taxes jointly, many wouldn’t qualify. But once someone is divorced, one individual might have little income. What is the subsidy based on in that situation?

If a couple divorces, each person’s eligibility for premium tax credits will generally be based on his or her own annual income. The former spouse’s income won’t be counted, even if the couple filed taxes jointly the previous year.

Premium tax credits are available to people with incomes up to 400 percent of the 2013 federal poverty level ($45,960 for an individual).

During the application process, people are asked to project their income for the year. If someone estimates income that’s taxes or wage information or Social Security data would suggest, the system will flag it.

At tax time next year, the Internal Revenue Service will reconcile an individual or family’s actual income against the amount that was projected. People who received too much in tax credits may have to repay some or all of it.