Teens Who Work: Does Their Income Count?

Think of yourself as a teenager. Did you work? Did you have a summer job lifeguarding at a pool, or a year-round job bagging groceries? Did you referee kids' soccer or baseball, or babysit your neighbor's first grader?

If you did work, then you are just like millions of American teenagers, who work for spending money, to help the family pay bills, or to save money for college. 

Found online here.

Found online here.

Lower-income families, filling out a Medicaid or Marketplace application, may wonder if the teen's income "counts."

Counting A Dependent's Income

The short answer: If the teenager's annual income is less than the required threshold for filing taxes ($6300 for earned income in 2016), then the income does not "count" as family income. If the teenager's annual earned income is more than the required threshold for filing taxes, then the income does "count" as family income. [Unearned income, such as interest from stocks or bonds, has a lower threshold to require tax filing.]
What if you have a dependent who is not a teenager, but who works? For example, what if your elderly mom lives with you and you take her as a dependent on your taxes?  What if she works 5 hours/week at a local store? The same tax filing threshold rules apply.

A Tale Of Two Families

Family 1: Maria, Juan, and Elizabeth

Maria is a single mom of Juan, age 17,  and Elizabeth, age 10. Maria works for a temporary agency and makes about $1700/month, or $20,400 annually. Using just that income, she--and her children--all qualify for Medicaid. 

Juan wants to go to college, and worked all summer scooping ice cream. He made $5,000. During the school year, though, his mom doesn't want him to work, because she wants to make sure he gets good grades. 

TEST YOURSELF: For Medicaid and the Marketplace, is the family income: 

icecreamscoop
  1. $5,000
  2. $20,400
  3. $25,400

 

If you answered #2, $20,400, you are correct. That's because Juan's ice cream income does not get added to the family income because it is less than the tax filing threshold. The entire family should be eligible for Medicaid.

**Note that Juan might still file taxes since he might get some money back in a tax refund--but it's the fact that he doesn't HAVE to file taxes that will mean that his income doesn't get added to his mom's income for the purposes of health insurance eligibility.

 

Family 2: John, Anne, Sarah and Jesse

John and Anne are married. Sarah is 16 and Jesse is 14. John cooks at a restaurant and makes about $2500/month, or $30,000/year. Anne recently went back to college and works very part-time in a grocery store, making about $500/month, or $6,000/year. Sarah wants to go to college, and she also likes to have some spending money, so she works full time in the summer, and part time during the school year, at the restaurant where her dad cooks. This year, she expects made $10,000.

TEST YOURSELF: For Medicaid and the Marketplace, is the family income: 

  1. $6,000
  2. $30,000
  3. $36,000
  4. $46,000

If you answered #4, $46,000, you are correct. That's because Sarah's income is above the tax filing threshold (she must file taxes), and so it gets added to John and Anne's income. The children--Sarah and Jesse--will still be eligible for MIChild. If John does not have an offer of employer insurance, then John and Anne will be able to go on the Marketplace

Resources

Teen Jobs and Tax Issues from Bankrate. 

How to File Your Child's First Income Tax Return from Investopedia. 

IRS Publication 929 - a very detailed explanation of dependents and income filing requirements.  

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