A year ago, the Affordable Care Act starred front and center as the most-anticipated Supreme Court decision that session. This session, two rulings on same-sex unions took the spotlight: In one, the high court decided Wednesday to overturn the Defense of Marriage Act, requiring the federal government to recognize gay marriages.
And this time around, the Affordable Care Act has a supporting role: to require the feds to recognize that same-sex marriages now change how the health law's insurance expansion works.
The health reform law uses income levels to determine who is eligible for what subsidies. Anyone earning less than 133 percent of the federal poverty line ($15,320 for an individual) will qualify for Medicaid coverage if the state is expanding Medicaid. Anyone earning from 133 percent to 400 percent of the poverty line qualifies for a tax subsidy to purchase health insurance.
The federal poverty line is very important here, as it determines who gets financial assistance and who does not. The poverty line also varies by family size, increasing incrementally as the family grows larger, as shown in this chart.
What does this mean for same-sex couples? A preliminary analysis from tax firm Jackson Hewitt suggest it largely depends on what each person earns. A couple where both have similar earnings could stand to lose out, as combining their incomes would put them above the 400 percent federal poverty level threshold for receiving benefits.
"For example, same-sex partners who each have an income of $40,000 may be eligible for the premium assistance tax credits under the ACA – but only if they remain single," the Jackson Hewitt analysis suggests. "If they marry (in those states that allow same-sex marriage), then they would lose eligibility because their income would be over the threshold for a household of two."
But there's also a potential for benefit for couples who have relatively different salaries. For example, say one spouse is unemployed and one earns $50,000. Separate, the unemployed person would qualify for benefits, but the $50,000 earner would be ineligible, having a salary too high to qualify.
Put them together in a family unit, however, and their combined earnings are now low enough to qualify both of them for a tax credit.
These are two relatively simple situations; others will certainly be more complex. And there's still a question of whether it's in a gay couple's best financial interest, under the Affordable Care Act, to be married (although likely not a couple's primary concern!). In that previous example, the unemployed spouse would get a much bigger salary if he or she had no income at all, rather than part of a unit earning $50,000.
"Suffice it to say, it’s complicated – and these are just the federal tax issues!" the Jackson Hewitt analysis concludes. "Further, we expect guidance from the Internal Revenue Service and other federal agencies later this year to clarify some of the outstanding questions."
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