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I live in Seattle and turn 18 before the year's end, and I'm told my family has an income such that if I get a job and make more than $1000, then I would push my family into a higher tax bracket.

Because of this – according to my parents – our health insurance would no longer cover my braces and the family would all of a sudden have to pay $3000 to $4000 for my braces, which I would have to pay because this would be caused by my job.

I don't think that my salary at minimum wage would be enough to cover the insurance, given that I would probably only have the job over this summer. What options do I have?

Edit: The #1 reason I want a job is to have spending money.

Edit 2: We are in the upper-middle class.

Chris W. Rea
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Jodast
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  • Volunteer somewhere. I'm sure there are non-profits in Seattle that could use some hands, and experience is always valuable. – quid Apr 30 '19 at 19:31
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    Did they give a specific reason why insurance would no longer cover braces for you if you had a job? – Nosjack Apr 30 '19 at 19:32
  • @quid I do volunteer, I'm just looking for money. – Jodast Apr 30 '19 at 19:32
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    Why would you have to file with your family? Cant you file as an individual return if you are 18 and working – Vality Apr 30 '19 at 19:33
  • @Vality because I'm still living in the household, so technically I'm contributing to the family income. Can I do what you said? – Jodast Apr 30 '19 at 19:33
  • @Nosjack no they did not – Jodast Apr 30 '19 at 19:34
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    @Jodast that's not how it works. You make money, you file a tax return. There is no "family income" beyond married filing jointly. – Kevin Apr 30 '19 at 19:36
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    What insurance do you currently have? Insurance generally isn't tied to taxes so it's a bit odd to connect them. And a child's income generally doesn't flow to the parents. If your insurance is through some sort of government welfare program, I could envision some sort of income qualification that might involve adding the income of all adults in the household so perhaps the concern isn't with the tax bracket but with the income threshold for the insurance subsidy. Of course, welfare programs generally aren't providing coverage for braces... – Justin Cave Apr 30 '19 at 19:46
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    @JustinCave my parents won't tell me. We definitely aren't on welfare, too, we live in a fairly affluent neighborhood. – Jodast Apr 30 '19 at 19:50
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    Sounds like your parents are trying to trick you into paying for your braces. – void_ptr Apr 30 '19 at 20:11
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    @void_ptr if the parents are trying to trick OP into anything, it's into not getting a job. – stannius Apr 30 '19 at 20:15
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    FWIW - I can't claim to know everything about the insurance side of this question, only the tax side. Is there insurance based on total family income as OP describes? – JTP - Apologise to Monica Apr 30 '19 at 20:19
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    @JoeTaxpayer i'm pretty sure it has to do with Obamacare, and we're the people they're taking the money from to provide the healthcare, but I'm just guessing here. – Jodast Apr 30 '19 at 20:32
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    I'm pretty sure there is not enough information here to provide a complete answer. It can be established that from a pure taxation perspective you income doesn't matter. That said unless the random people of the internet can know the ins and outs of the plan paying for your braces or your family income we really can't offer concrete insight into the matter. – Myles May 01 '19 at 14:19
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    @JoeTaxpayer It sounds likely that the insurance is in some way publicly subsidized, either through Medicaid or through an appropriately tiered (usually Silver) insurance plan on the ACA market. In either case total household income matters, and a legal adult may well count towards household income. It's a real problem with means-tested, tapering benefits that cliffs like this are created. – Upper_Case May 01 '19 at 14:57
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    @Jodast Your assessment that "we're the people they're taking the money from to provide healthcare" doesn't make any sense to me. If the insurance is at risk due to increased household income, it's because your household is receiving some form of subsidy (or other support) for which your family would no longer be eligible with income over a threshold amount. – Upper_Case May 01 '19 at 15:00
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    @Kevin: Perhaps the problem is that the parents are worried that they would no longer be able to claim the OP as a dependent? – jamesqf May 01 '19 at 15:59
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    @jamesqf at this point I almost think that it's just because they don't want me to have a job, as they've come up with numerous other excuses in the past – Jodast May 01 '19 at 17:45
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    The other thing is that "Health Insurance" and "Dental Insurance" are not the same things. They are separate insurance products with different coverage limits and rules. – JPhi1618 May 01 '19 at 20:34
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    This sounds like a benefit cliff issue, not a tax bracket issue. It's tricky to answer without knowing exactly what kind of insurance your family currently has. If you could modify (or perhaps ask a new question) with this information, you should be able to get a better answer. – lzam May 01 '19 at 20:47
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    "upper middle class" is meaningless. What is your total family income? – Carl Witthoft May 02 '19 at 12:15
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    The job and experience are worth more than the cost of the braces. If you're upper-middle class the money should not be the primary concern here. Don't squander life experience to save a few dollars today. – J... May 02 '19 at 12:41
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    @CarlWitthoft no idea, they won't tell me – Jodast May 02 '19 at 14:59
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    I am not knowledgeable enough to feel I can add an answer, but it sounds like your parents are talking about an Obamacare health insurance plan for which they are receiving a hefty subsidy. In that case, I think your income would be included in family income used to compute the subsidy, thus potentially losing or diminishing the subsidy they get. See the 3rd article here: https://tarlow.com/tag/advanced-premium-tax-credit/ –  May 02 '19 at 17:40
  • https://en.wikipedia.org/wiki/Agorism Don't report anything. – Chloe May 03 '19 at 19:43
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    @Chloe im not 100% sure that's the best idea – Jodast May 03 '19 at 19:44

4 Answers4

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The tax return of a dependent does not flow to the parents return. Earned income is taxed at your own rate, up to $12,000 tax free. for your own standard deduction, but unearned income is taxed at higher trust rates. No idea where they are getting this information from.

If your parents' insurance is somehow tied to "family income," things change. It's still not an issue of marginal rates or even taxes, it's an issue of the rules regarding their insurance coverage. Outside my area of knowledge, but they should be more open to explain these details to you.

JTP - Apologise to Monica
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  • So then I can get a job and my parents have no extra taxes or anything? – Jodast Apr 30 '19 at 20:30
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    Strictly for tax purposes, yes. I did my 20 year old's taxes. No part of it flowed to mine in any way, or mine to her's. So the answer is that your taxes doesn't affect the parents' marginal rate, or taxes. If they are on an insurance plan that takes familiy income into account, the result may be different. – JTP - Apologise to Monica Apr 30 '19 at 20:33
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    @JoeTaxpayer It may be a bit different for your parents if you're still listed as a dependent for them (you don't want to claim yourself as independent and them do so as well), but that doesn't affect income. Keep in mind, if you make less than $12,200 (2019) then you don't need to file at all. If you do file (for other benefits like the EITC), it would still have no effect on their return or taxes. – Anoplexian Apr 30 '19 at 20:47
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    Fair enough, but the tax return says "can anyone claim you as a dependent"? And of course, it's yes. Either way. – JTP - Apologise to Monica Apr 30 '19 at 20:49
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    @JoeTaxpayer True enough. Also, if they don't file taxes, they aren't considered a part of household income for social programs. – Anoplexian Apr 30 '19 at 20:52
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    OP also mentions health insurance (the 3-4k for health expenditures seem to be their main concern). Could OPs income potentially cause problems there? If this is at least theoretically possible, you might want to add a small footnote about that. – tim Apr 30 '19 at 20:52
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    @Anoplexian That's not necessarily true (it's a very patchwork system, with lots of special cases). Though, without filing tax returns it becomes far less likely that the income would be known to the agency reviewing the application. – Upper_Case May 01 '19 at 15:04
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To be clear, this has nothing to do with tax brackets. (There's a longstanding belief that getting into a higher income bracket will increase taxes on all your income, when that bracket just applies to your new income.) Instead, this has to do with eligibility to (I believe) Apple Health, which is Washington's low-income health insurance program. This pdf has the eligibility requirements by household size, and they are pretty tight. I doubt there's any way that your income can avoid being counted against household income while also being covered under this program. I think after you turn 18, you could declare yourself to no longer be part of their household, but then your family might get kicked out because their family size shrinks, so watch out for that. (I'm not sure how optional this would be anyway.) I would recommend not doing anything to increase your family income until your braces (and any other expensive medical work) are completed.

EDIT: Just saw the note that your family is upper-middle class. This means that the most likely circumstance is that they're pushing up against the limit before the federal government stops subsidizing health insurance. This depends on family size, but for a 3-person family, that would be roughly $80,000/year, or $100,000/year for a 4-person family. There's a severe cliff after this point, so crossing that point would not be recommended without thought. However, Anoplexian noted that there's a $12,000 limit in earnings before your income counts toward this number, so as long as you stay below that threshold you should be fine.

EDIT2: is the "make more than $1000" per month? If so, that matches the $12,000/year figure I gave. You'll have trouble hitting that anyway for a summer job. There's not much standing in your way then.

yoozer8
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user3757614
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    Yes - I think everyone is caught up in 'tax' aspect of this question. There are social benefit type programs that count 'household income' in such a way that a child who is over the age of 18's income would be included. – Rob P. Apr 30 '19 at 20:35
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    @RobP. The problem with what you said is that it simply isn't true. If they make less than $12,200 in the calendar year, programs won't count them as household income unless they file income tax. – Anoplexian Apr 30 '19 at 20:50
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    And the OP believes the family to be in the "upper middle" income bracket, which, by standard definitions, would put them above the cutoff for the Apple plans in the brochure. So this really doesn't add up. – CCTO Apr 30 '19 at 20:54
  • @CCTO Thanks for pointing out that they were upper-middle; I missed that edit. – user3757614 Apr 30 '19 at 21:36
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    @RobP. - yes, I acknowledged that. – JTP - Apologise to Monica Apr 30 '19 at 21:36
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    @CCTO No, he said they live in a "fairly affluent neighborhood". They could have found a relatively inexpensive house, or just have most of their income going to the mortgage to be in that neighbor or school district. And/or be doing some creative accounting. – mkennedy Apr 30 '19 at 21:42
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    @mkennedy it's a house on the water, but its a really run down house my grandparents built in the 60s. Our neighbors tend to do really, really well. – Jodast Apr 30 '19 at 21:46
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    @Anoplexian - Neither your link nor your statement disprove or even disagree with my statement. I said that some social programs count household income in such a way that would include income from an 18 year-old child who works meeting whatever criteria they specify. You have shown a specific program that doesn't include income in a specific scenario. My comment was in response to comments I saw outright dismissing the idea that income earned by a 'child' could impact the parents negatively. – Rob P. May 01 '19 at 02:17
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    @JoeTaxpayer - Yes - and I think that it was a nice addition to your original answer. – Rob P. May 01 '19 at 02:19
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    @mkennedy, in EDIT2 he says they’re upper-middle class, quote unquote. This being stackexhange, no two commentators can know if they’re talking about the same question, but for now, that’s what it says. – CCTO May 01 '19 at 02:48
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    @Jodast your parents probably don't make as much money as you're assuming (or they're leading you to believe). – Kat May 01 '19 at 16:49
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I feel like it's worth talking about the "tax bracket" part of this question, as it's a common misconception.

Let's suppose we're dealing with a simple tax system with two brackets: 20% up to $100,000 a year, and 25% above that.

Now let's say I make $98,000 a year and I'm taxed at 20%. That means I pay $19,600 a year in taxes.

Now suppose that I get a $5000 raise. Now I'm making $103,000 a year. Does that mean that at that 25% rate, now I'm paying $25,750 in taxes? Has a $5000 raise turned into a $6150 increase in my tax bill!? Should I turn down the raise!?

No. That's not how tax brackets work.

The 25% rate only applies to the amount of my income that's over $100,000. I'm not paying 25% on $100,000. I'm paying 25% on $3000.

The math works like this:

$100,000 x 20% = $20,000
$  3,000 x 25% = $   750
Total tax bill:  $20,750

Total increase:  $ 1,150

So my extra $5000 in income gives me an increase of $1150 on my tax bill. Keep the raise!

Kyralessa
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    OTOH, in a hypothetical world where the OP's summer job might increase the family taxes like this, it would not be unreasonable for the family to expect him to cover the $1,150 of taxes from the money he has earned. ... and there are lots of examples from around the world where the marginal rate of tax can exceed 100% (you are worse off accepting the rise), because means-tested benefits are withdrawn too fast. – Martin Bonner supports Monica May 02 '19 at 13:11
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Your parents are concerned that an increase of your household income will make your family ineligible for healthcare insurance subsidy. It has nothing to do with their tax bracket but it's understandable that they've confused the two.

I found an online calculator that helps you estimate the subsidy your family would receive based on income and other factors: https://www.kff.org/interactive/subsidy-calculator/

You can use it to "game" different scenarios.

I don't know how "steep of a cliff" there is but it's possible that your earnings will not push you completely off and you and your family might still be better off if you worked.

Another option is to look into filling on your own. That's more complicated because it will cause your parents to pay higher tax because they won't be able to use your deduction, but on the other hand you'll get tax deduction and might be eligible for other tax credits. Again, using the calculator will help you see how such a move will affect your family's situation. In this case it's probably a good idea to talk to a tax professional.

Finally, your parents could seek employer based insurance coverage. Since your indicated your family is upper-middle class, it's possible the subsidy you are receiving is not that large anyway. You might qualify for subsidy on your own and your family might be able to get lower premium insurance for themselves from their employer. It's probably not very likely this is the case, but if that's a viable option, it will remove the subsidy consideration and you can make as much money as you want.

ventsyv
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