Gifting Money Counts As Income, Apparently

[dgoldenz]

One of my clients has parents both about 80 years old that he was trying to get an on-exchange policy for. They have no income and are in a non-Medicaid expansion state, so not eligible for subsidy with no income. Apparently the HC.gov app allows money that is gifted to them by their own child to be considered income for purposes of calculating a subsidy, and now they get a $1200/mo subsidy with max cost-sharing reduction, resulting in a $3/mo premium.

Never seen this scenario before. You learn something new every day...what a system!

 

[Yagents]

Gifting under 10k is not taxable............this is wrong info. What else can you expect from the HC.gov machine

 

[RayNY]

If there's no income, no medicaid expansion, and a gift makes a couple subsidy eligible (about $21,000 for 2013), it's safe to assume the gift is a lot more than $10k.

 

[Ann H]

Gifting under 10k is not taxable............this is wrong info. What else can you expect from the HC.gov machine

You are correct, it is wrong info.

The amount used to be $10,000. As of 2013 the limit is now $14,000, and for couples it is $28,000. I believe that is per recipient, but I'm not going to look it up, because it's a moot point.

The reason it's a moot point, is because that $14,000/$28,000 annual exclusion affects the giver instead of the receiver. If the annual gift is more than that, it goes against the giver's lifetime exclusion for gift tax.

The receiver is not taxed on the gift, unless it's an unusual situation, like Mom & Dad really are employed by sonny-boy, or something like that.

Now, I will say that government programs have been known to use family gifts as part of income. Medicaid has a slightly different calculation of MAGI than the subsidy does, and I can't remember if family gifts go toward MAGI for Medicaid. Family gifts do not go towards MAGI for the APTC.

 

[Yagents]

There goes the "givers gain" saying.

As usual, you are correct Miss Ann. I didn't get taxed on the 1 million my great 2nd niece gave me last year (Just kidding, if Mr IRS is reading this)

 

[dgoldenz]

Family gifts do not go towards MAGI for the APTC.

Apparently they do because this is the only "income" they have and were given a $1200/mo subsidy. HC.gov made the son send in some kind of letter stating that he was going to gift them the money.

 

[houcoogster]

I'm not sure, but I think any income counts to qualify if you want/need to claim it but if you don't need to then you can leave it off. At least that's the way it seems...who knows for sure. I mean think about it a Vet that gets $1500 a month his wife doesn't work she can't get a subsidy bcuz her hero husband's pay is not taxable.....gimmie a break.

 

[yorkriver1]

Re: Gift income, maybe they call it "other" type of income for subsidy purposes? Here's the list of what income not to count direct from HC.gov:
https://www.healthcare.gov/what-inc...rovide-when-i-apply-for-marketplace-coverage/

Don't include the following:

Child support
Gifts
Supplemental Security Income (SSI)
Veterans' disability payments
Workers' compensation
Proceeds from loans (like student loans, home equity loans, or bank loans)

A case I looked at recently, wife has just under $18K income, was told subsidy based on that, & given an estimate. Husband has a bit under $11K of Social Security Disability income. Just rechecked the rules on HC.gov:

MAGI is generally your adjusted gross income plus any tax-exempt Social Security benefits (except for Supplemental Security Income (SSI), which is not counted), tax-exempt interest, and tax-exempt foreign income.


VA disability is not to be reported, but Social Security Disability is to be reported. Strange inconsistency, that might have worked to favor folks if the Medicaid expansion were in place everywhere, but that's another thread. I am not discussing pro/anti the rules here, just working to do it correctly as it stands today.

Now, maybe financial planners and lawyers will be advising how to set up trusts, or otherwise get income to family members that will qualify them for subsidies. Or, will pass the word, how HC.gov categorizes gifts so they count as HH income. Mild irony here.

 

[Ann H]

Here's the list of what income not to count direct from HC.gov:
https://www.healthcare.gov/what-inc...rovide-when-i-apply-for-marketplace-coverage/

Don't include the following:

Child support
Gifts
Supplemental Security Income (SSI)
Veterans' disability payments
Workers' compensation
Proceeds from loans (like student loans, home equity loans, or bank loans)

Thank-you, Houcoogster, for posting that list from healthcare.gov. I was just about to do so myself. Clearly, healthcare.gov is saying not to include gifts.

The problem with the representative at the marketplace accepting the gift as "income", is that it won't be "income" at tax-filing time. So, the clawback would apply.

However, as I posted earlier, there may be some other issue with this particular case, such as the son claiming it was compensation for services rendered, or some other distribution that would indeed be income rather than a gift.

 

[RayNY]

Ann,

"Clawback would apply"?

I thought we all agreed that if income ends up being under subsidy eligibility at the end of the year, there's no clawback?