Covered California: Can You File Married Separately and Still Qualify?
Learn how filing as married separately affects your Covered California eligibility, tax credits, and health coverage options under IRS rules.
Health insurance through Covered California is a vital option for individuals and families seeking affordable coverage. However, tax filing status significantly impacts eligibility for financial assistance, particularly premium tax credits that reduce monthly costs.
A common question is whether married couples can file separately while still qualifying for these benefits. Tax rules directly affect health insurance subsidies, and misunderstanding them can lead to unexpected costs or loss of coverage.
Filing Requirements and IRS Rules
The IRS generally requires married couples to file jointly to qualify for premium tax credits under the Affordable Care Act (ACA). This rule is established in 26 U.S. Code 36B, which governs these credits.
Exceptions exist. A person who qualifies as an “abandoned spouse” under 26 U.S. Code 7703(b) may be considered unmarried for tax purposes and file as Head of Household. To qualify, they must have lived separately from their spouse for at least the last six months of the year and maintained a home for a dependent child. Another exception applies to individuals who are victims of domestic abuse or spousal abandonment. In these cases, they may file separately and still receive premium tax credits. IRS Publication 974 provides guidance on these exceptions.
Filing separately has broader tax implications. The standard deduction for married filing separately in 2024 is $14,600, half of the $29,200 available to joint filers. Many credits, such as the Earned Income Tax Credit (EITC) and Child and Dependent Care Credit, are reduced or unavailable to those filing separately. This can increase overall tax liability, making it important to weigh financial trade-offs before choosing a filing status.
Eligibility for Premium Tax Credits
Premium tax credit eligibility depends on several factors beyond tax filing status. The ACA sets income thresholds based on the federal poverty level (FPL), updated annually. In 2024, individuals and families earning between 100% and 400% of the FPL may qualify for subsidies, though California extends assistance beyond this range through state programs.
Subsidy amounts are based on modified adjusted gross income (MAGI), which includes wages, self-employment earnings, Social Security benefits, and certain tax-exempt interest. Since MAGI determines eligibility, deductions such as student loan interest or IRA contributions can influence qualification. For married couples filing separately, MAGI is calculated individually, which can lead to different subsidy amounts than filing jointly.
Employer-sponsored coverage also affects eligibility. If a workplace plan is considered “affordable” under ACA guidelines—meaning employee premiums do not exceed 8.39% of household income in 2024—premium tax credits are unavailable, even if a marketplace plan appears cheaper. When filing separately, this affordability test applies to each spouse individually, potentially limiting subsidy options.
Household Composition and Income
Household size impacts eligibility for financial assistance through Covered California. The marketplace considers everyone included in a tax return when determining household size, which affects income thresholds for subsidies. Even if a spouse is not applying for coverage, their income is counted if a joint return is filed. Dependents, such as children or other qualifying relatives, also factor into the equation, potentially altering subsidy eligibility.
The IRS defines dependents based on residency, financial support, and relationship. A child must live with the taxpayer for more than half the year and not provide more than half of their own financial support to be considered a dependent. Other relatives, such as parents or siblings, may qualify if they meet income and support requirements under 26 U.S. Code 152. Including additional dependents increases household size, which can raise the income limit for subsidies.
Self-employed individuals and those with fluctuating income must estimate their annual earnings for subsidy calculations. Covered California requires applicants to project their yearly income, and significant discrepancies between estimated and actual earnings can result in repayment obligations at tax time. Freelancers or commission-based workers may benefit from making quarterly estimated tax payments to better align reported income with reality. Keeping detailed records of earnings and deductions can help avoid unexpected liabilities.
Separate Return Impact on Coverage
Filing separately can complicate Covered California enrollment, particularly when determining affordability and access to financial assistance. Since subsidies are calculated differently for those who file jointly versus separately, individuals may find their expected contributions toward premiums shift significantly. Even if one spouse earns substantially less than the other, subsidies are based on individual income in a separate return, which can sometimes result in higher out-of-pocket costs.
Cost-sharing reductions (CSRs), which lower deductibles, copayments, and out-of-pocket maximums for Silver-tier plans, are also affected. Since CSRs are tied to income eligibility, filing separately can reduce or eliminate access to these savings. This can be particularly impactful for those with high medical expenses, as losing CSRs may lead to higher overall healthcare costs, even if monthly premiums remain manageable.
In cases where one spouse qualifies for Medi-Cal while the other applies for a marketplace plan, separate filing can create administrative hurdles. Covered California verifies income data with federal and state agencies, and discrepancies between tax filings and reported income may trigger additional documentation requests or delays in enrollment. This can be especially problematic for those who need continuous coverage, as gaps in insurance can result in penalties or loss of provider access.