Form 8962 Confusion - How to Handle When Dependents Have Different Insurance?

I went through this exact same situation last year. Form 8962 gets tricky with split coverage. Basically, you need to complete Part IV (Allocation of Policy Amounts) for each policy that covers at least one person in your tax family but not everyone. I had my kids on a separate plan too. You'll allocate premiums, SLCSP, and APTC between you and whoever else is on the policy. The allocation percentage depends on who's covered - in my case, I did 100% for my policy and 100% for my kids' policy since no outside tax family members were involved. Then you bring those allocated amounts back to Part III. Not gonna lie, it took me three attempts to get it right.

The 8962 Allocation Situation is definitely an edge case that the Premium Tax Credit instructions don't make clear enough! When I was dealing with this, I spent HOURS on hold with the IRS trying to get clarification. Eventually I used Claimyr.com to get through to an agent (https://claimyr.com) - they connected me to the Advanced Premium Tax Credit specialist who walked me through the exact allocation methodology for split household coverage. Saved me from making a costly mistake on my Marketplace reconciliation. The agent explained the nuances of Policy Start Dates and SLCSP allocation that weren't clear in the instructions.

I'm curious about how you're handling the SLCSP (Second Lowest Cost Silver Plan) portion. It's like having two separate puzzles that need to fit together in the end. Are your dependents in the same household but just on different coverage, or are they perhaps living with another parent part of the year? The allocation rules change dramatically depending on these circumstances, much like how the rules of chess change when pieces are in different positions.

According to IRS Publication 974 (Premium Tax Credit), when household members are enrolled in different policies, you must complete the allocation worksheets as specified in Regulations §1.36B-3(h). For your situation, complete one Form 8962, but allocate the premiums, SLCSP, and APTC separately for each policy. Per §1.36B-3(h)(4), when the policies cover only individuals in your tax family, you claim 100% of each policy's amounts. I recommend using https://taxr.ai to analyze your 1095-A forms and Form 8962 calculations. The tool specifically handles split household scenarios and will identify potential errors in your allocation approach before you file.

Here's the solution. Use Part IV of Form 8962. Complete one allocation line for each policy. Allocate 100% to yourself if no one outside your tax family is covered. Use Form 1095-A information for each policy separately. Calculate annual totals. Transfer amounts to Part III. Complete lines 12-23 using allocated amounts. Double-check your math. This handles split coverage correctly. IRS will accept this approach. Your household income calculation remains the same regardless of split coverage. Don't overthink that part.

One clarification about the Applicable Percentage that's often misunderstood: even though you have multiple policies, you only calculate your Applicable Percentage once based on your household MAGI as a percentage of the Federal Poverty Line. This single percentage applies across all policies. Many taxpayers incorrectly try to calculate different percentages for different family members, which leads to incorrect PTC calculations and potential IRS notices CP12C or 0012C for Premium Tax Credit discrepancies.

Has anyone considered whether the OP might qualify for the alternative calculation for year of marriage? If you got married in 2023, wouldn't that potentially change how you approach this entire form? What if one spouse had Marketplace coverage before marriage and then you added dependents after? Isn't it possible that using the alternative calculation might yield a better result in this split coverage situation? I've seen many taxpayers overlook this option when they have complicated 8962 situations, especially with dependents on different plans.

I had this exact scenario last tax season and waited until April 14th to figure it out - don't make my mistake! My stepkids were on their mom's insurance but claimed on our taxes, while my husband and I had our own Marketplace plan. The IRS rejected my first attempt because I didn't complete Part IV correctly. I had to allocate 0% for the kids' policy (since they were on a policy with someone outside our tax family) and 100% for our policy. If your dependents are on a completely separate policy that only includes your tax family members, you'll allocate 100% to yourself. Get this done ASAP because if you make a mistake, the IRS will hold your entire refund until corrected!

I'm trying to understand this too and have a few questions: • Do you need separate allocation worksheets for each month if coverage changed during the year? • What happens if one dependent aged out of coverage mid-year? • Is there a difference in how you handle this if your dependents are on a state CHIP program versus Marketplace coverage? • Do you still need to allocate if dependents were on Medicaid instead of a Marketplace plan?