How would this work with repaying advance payments of the premium tax credit:
Woman makes very little money.
Man makes a lot of money.
Woman will need health insurance for herself and her daughter for the period 9/1/18 – 12/31/18. Let’s say she goes to the Exchange to buy it, using HOH status, and is entitled to some advance payments.
Man and woman marry each other on 12/28/18. The couple will not live together until 2019. They are not in a community property state.
I’m thinking that if they file a joint return, husband’s big income will definitely have to be considered and the alternative “we got married during the year” rule would apply. In other words, in computing household income for each unmarried month during which the Exchange policy was in force for woman and her daughter, half of the couple’s combined income would be attributed to the woman. I understand that this might act to reduce the repayment of the credit when compared to taking 100% of the joint income for each married month, but it’s really no consolation since 50% of the joint income is way more than the woman’s separate income. In summary, I’m concluding that if they file MFJ, there is no way around the 50% joint income allocation to the woman, even though the spouses were not members of the same household for any part of 2018. This will likely result in all of the advance payments having to be repaid. Do I have it right?
What is the consequence if they both file HOH? (Man has his own daughter, man maintains a household, etc.). Is it true that we’d only look at the woman’s income (instead of splitting the joint income in half for the unmarried months) and 100% of the Exchange stuff would get allocated to woman? If this is the case, woman would likely have to repay nothing. Or, do I have it wrong? Would the marriage force us to consider husband’s income even though they don’t file MFJ (and even though they don’t live in the same household for any part of 2018)?