Impact of ObamaCare on dependents not covered by Corporate Medical Insurance
Many Indians in the USA are responsible for the care of their dependents (parents, siblings, etc.) who are not US Nationals or Permanent Residents (Green Card holders). In the past, family members who visited the USA on Visitor visa could be claimed as dependents, if they met the physical presence test. They could get an ITIN and be claimed as a dependent, providing tax benefits to the taxpayer in the US.
With the passage of Affordable Care Act (ACA), this completely changed. Starting year 2014, penalties were applicable for not having Medical Insurance under Affordable Health Care Act or not being compliant with Obamacare in the USA. For tax year 2015, the ACA penalty is 2% of your total household adjusted gross income, or $325 per adult and $162.50 per child, to a maximum of $975, whichever is higher. For tax year 2016, the penalty rose to 2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child, to a maximum of $2,085, whichever is higher. This changes the benefits in term of tax savings and requires planning from a tax perspective.
For those looking forward to have their parents in the USA, without the burden of Obamacare penalties or the requirement to take the insurance, it is best to have the parents file taxes for themselves as independent family unit, if they have crossed the taxable income threshold. This would allow them to claim exemptions under the clause that the cost of bronze plan being more than 8% of their incomes or considered unaffordable (generalized but applicable to most parents).
For families looking to move parents to the USA permanently, applying for a Green Card is a great option. The cost of medical insurance is a big deterrent. However, they can become eligible under Medicaid for Medicare since they would have incomes low enough to make them eligible for the same, after a 5 year cool off period. This would make them eligible for ACA plans at a very low cost at the end of 5 years, when the Medicaid starts for your dependents.
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Legal Disclaimer: All views in the article are the personal opinion of the author and has been highly generalized. Please consult your tax advisor/lawyer for making plans suitable to your personal situation.
Author: Radha Aggarwal from Taxes by Radha
Radha is a CA from India and CPA in the USA, with a total of over 20 years of experience in auditing, international accounts consolidation, personal taxes and international taxation issues.