Dependent Income Exclusion Act of 2025

Bill Number

H.R. 3769

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-06-05: Referred to the House Committee on Ways and Means.

Last Updated

2025-07-17T15:40:33Z

AI-Generated Summary

Purpose

The Dependent Income Exclusion Act of 2025 aims to make health insurance more affordable for families by adjusting how income is calculated for eligibility in the premium tax credit (PTC) program under the Affordable Care Act (ACA). Specifically, it excludes certain earnings from young dependents when determining a household's modified adjusted gross income (MAGI), which is the key measure used to qualify for or calculate the size of these tax credits. MAGI is essentially a taxpayer's adjusted gross income plus certain additions, used here to assess financial need for subsidies.

Key Provisions

• Exclusion of Dependent Income: Wages (as defined for withholding taxes) or net earnings from self-employment of a taxpayer's dependent are not counted in the household's MAGI for PTC purposes if the dependent:
• Is under age 18 at year-end, or
• Is under age 24 at year-end and meets one of these criteria during at least 5 months of the year: is a part-time or full-time student (with some adjustments to existing student definitions, treating for-profit schools as qualifying educational institutions), is in a qualified job-training program (as defined under the Workforce Innovation and Opportunity Act, which includes training services like occupational skills programs), or is in a registered apprenticeship program under the National Apprenticeship Act.
• Income Limitation: The exclusion applies only up to an amount equal to 15% of the taxpayer's own MAGI; any excess dependent income must still be included.
• Special Rule for Medicaid Non-Expansion States: In states that have not expanded Medicaid eligibility under the ACA (as of the start of the tax year), the exclusion applies to dependents only if it does not reduce the household's MAGI below 100% of the federal poverty line (FPL) for the family size. The FPL is a government measure of minimum income needed for basic needs, adjusted annually.
• Reporting Requirements: Health insurance marketplaces must collect and report information on these dependents' employment income to ensure proper PTC calculations.
• Effective Date: Applies to PTCs and advance payments for tax years beginning after the bill's enactment.

Significant Changes to Existing Law

• Amends Section 36B(d)(2) of the Internal Revenue Code (IRC) by adding a new exception that ignores specific dependent income in MAGI calculations, which previously included all household members' income without such carve-outs for young workers.
• Updates ACA reporting rules under Section 1411(b) to include details on qualifying dependents' income, ensuring exchanges (like Healthcare.gov) can verify eligibility accurately.
• These changes build on but modify existing ACA rules for students (typically full-time under age 24) by broadening to part-time students, job training, and apprenticeships, while adding caps and state-specific safeguards not present before.

Potential Impacts

• On Citizens: Families with working children or young adults (e.g., teens in part-time jobs or college students with gigs) could qualify for larger PTC subsidies, reducing out-of-pocket health insurance costs. This may help low- and middle-income households afford coverage, potentially increasing enrollment in ACA plans and reducing uninsured rates among youth.
• On Government Agencies: The IRS will need to update tax forms and software for PTC claims; the Department of Health and Human Services (HHS) and state exchanges must implement new data collection and verification processes, possibly increasing administrative costs initially but simplifying eligibility for affected families long-term.
• On International Relations: No direct impacts, as this is a domestic tax and health policy.

Main Stakeholders Affected

• Families and Taxpayers: Primarily low- to moderate-income households with dependents under 18 or up to 24 in education, training, or apprenticeships, who may see improved access to subsidized health coverage.
• Young Workers/Dependents: Teens and young adults whose earnings (e.g., from summer jobs or self-employment) won't penalize family PTC eligibility.
• Government Entities: IRS (tax credit administration), HHS (ACA oversight), and state-based health insurance marketplaces (eligibility verification).
• States: Especially the 10 states that have not expanded Medicaid, where safeguards prevent unintended eligibility shifts that could affect state budgets or federal matching funds.
• Employers and Training Providers: Minimal direct effects, but registered apprenticeship and job-training programs may indirectly benefit from supporting family health affordability.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens ACA implementation by refining income rules without altering core eligibility thresholds, potentially reducing disputes over MAGI calculations in tax courts. It aligns with existing workforce laws (e.g., referencing the Workforce Innovation and Opportunity Act) but requires clear IRS guidance to avoid compliance issues.
• Constitutional: No major concerns; as a tax code amendment, it falls under Congress's broad authority over taxation and spending (Article I, Section 8), and it does not infringe on state rights beyond tying into voluntary Medicaid expansion decisions.
• Political: Could appeal across party lines by supporting working families and youth employment/education without expanding government spending directly (PTCs are tax expenditures). However, it may face debate in non-expansion states over protecting Medicaid thresholds, and critics might argue it complicates tax administration or favors certain households.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Horsford, Steven [D-NV-4]

Cosponsors (1)

Rep. Moore, Gwen [D-WI-4]

Recent Actions

• 2025-06-05: Referred to the House Committee on Ways and Means.
• 2025-06-05: Introduced in House
• 2025-06-05: Introduced in House

Bill Versions

• Dependent Income Exclusion Act of 2025 — issued 2025-06-05 — PDF (5 pages)