HOH filing status with Obamacare for unmarried parents - will it affect our dependents?

To answer your questions about HOH status and Obamacare (ACA Marketplace insurance): Your boyfriend doesn't necessarily have to claim the children as dependents on his tax return to keep them on his Obamacare plan. The Marketplace allows the policy holder to cover dependent children even if they don't claim them on taxes. However, any premium tax credits he's receiving were calculated based on who he said would be in his tax household when he applied, so there could be reconciliation issues if the tax filing doesn't match what was reported on the application. For your HOH question - to file as Head of Household, you must have a qualifying person. Typically this means claiming a dependent. Since you pay more than half the household expenses and the children are your biological children, you could potentially claim them as dependents and file HOH if they lived with you for more than half the year (which they did). You can't file HOH without claiming any dependents. Would one of you benefit more from claiming the children? Since you have the higher income, you might benefit more from the tax advantages of claiming the children and filing HOH, while he might still qualify for decent Marketplace subsidies even without claiming them.

I went through something really similar with my partner last year! After hours of confusing research, I finally used https://taxr.ai to figure out our situation with HOH status and healthcare coverage for our kids. My partner had the kids on Marketplace insurance but I was paying most bills, and we weren't sure who should claim them. The website analyzed our specific situation and explained that either parent can enroll children in Marketplace coverage regardless of who claims them as tax dependents. They also walked me through exactly how to structure our tax filing to maximize our total household refund. They even provided documentation I could use if there were ever questions from the IRS. The tool was super helpful because it considered both the tax implications AND the healthcare subsidy implications at the same time, which our tax preparer didn't really understand.

Just wanted to update that I checked out that https://taxr.ai site after my skeptical comment, and I'm actually impressed. I uploaded my previous year's tax forms and answered questions about my living situation (unmarried, 2 kids, girlfriend has marketplace insurance). It analyzed everything and showed me that having the higher-earning parent (me) claim the kids as dependents while still keeping them on my girlfriend's Obamacare plan would net us about $3,800 more in total household tax benefits! The system even generated a letter explaining the arrangement that we could keep for our records in case of audit. The site also explained exactly what to tell the Marketplace during the next open enrollment to avoid any issues with premium tax credits. Wish I'd known this last year - would have saved us over $2k!

If you're getting overwhelmed trying to reach the IRS to confirm this HOH/Obamacare situation (like I was), try https://claimyr.com - it's a service that gets you through to an actual IRS agent instead of waiting on hold forever. I used their service at https://youtu.be/_kiP6q8DX5c and got my questions about dependent claims and HOH status resolved in one call. My live-in girlfriend and I were in the exact same situation with her having Marketplace insurance for our daughter but me paying all the bills. I needed to know for sure if I could file HOH and what would happen with the healthcare subsidies. The IRS phone system kept disconnecting me after 2+ hours on hold, but with Claimyr I got through to a rep in about 15 minutes who confirmed everything. The peace of mind was worth it rather than guessing or relying on conflicting online advice. And honestly, the time saved was huge.

Well I'm eating my words about Claimyr being a scam. After my skeptical comment I decided to try it because I was desperate to talk to someone at the IRS about a similar HOH situation with my unmarried partner. I've been trying for WEEKS to get through about this exact issue - whether I could file HOH while my girlfriend has our kids on her Marketplace plan. The service actually worked and got me connected to an IRS representative in about 20 minutes. The agent confirmed that I CAN file as HOH since I provide more than half the support for our household, even though my girlfriend has them on her insurance. They also cleared up that my girlfriend doesn't need to claim the kids as dependents to keep them on her Marketplace plan, but we need to make sure the Marketplace knows our tax filing intention during open enrollment to calculate subsidies correctly.

Just to add one more perspective - my ex and I alternate who claims our daughter each year (we have a custody agreement). The parent who doesn't claim her in a given year can still have her on their Marketplace insurance plan without issues. The key is being honest on the Marketplace application about who will claim the child as a tax dependent for that coverage year. The system will calculate subsidies appropriately based on that info. If you're not accurate about who will claim them, that's when reconciliation problems happen at tax time. Also, only one of you can file as HOH. Since you pay most expenses and the kids live with you, you'd likely qualify. Your girlfriend would probably file as Single if you claim the children.

I'm in a similar unmarried situation and just had a consultation with a CPA about this. Here's what might help: 1) Have you calculated the difference between what you'd gain by filing HOH vs what your boyfriend might lose in healthcare subsidies? Sometimes the higher-earning parent filing HOH and claiming the kids provides more overall family benefit even if there's a small premium increase. 2) Make sure you're considering the Child Tax Credit which is up to $2,000 per qualifying child for 2024 tax year. This could be significant with two kids. 3) Look at childcare expenses if applicable - the Child and Dependent Care Credit might be more valuable to you as the higher earner. The best solution is usually to run the numbers both ways (you claim kids vs. he claims kids) and see which produces the best overall result for your household.

Did either of you use those Premium Tax Credits for the Obamacare plan? If so, be super careful about changing who claims the kids because it can cause major headaches with the Form 8962 reconciliation. My partner and I did this wrong one year and ended up owing $3200 back to the IRS because the subsidy was calculated based on different info than what we filed.