Friday, December 27, 2013

Overseas ObamaTax Conundrum

So, had a client stop by yesterday with a very intriguing question:

His daughter is a US citizen, but is a full time student in, and permanent resident of, Italy. He is himself Italian, but has lived in the US for over 40 years. He's also retired and on Medicare, so she can't be on his plan.

He came by because he'd been reading about "this new law" that required all US citizens to have insurance, and he wasn't sure what to do about his daughter. She's a citizen, but she doesn't live here, so would she be in trouble? Could we even write a plan for her if it was necessary?

All good questions, and I promised to find the answers. As I explained to him, I am very blessed to have built up quite a large circle of insurance experts over the years, friends and colleagues all over the 58 states on whom I can call for help and advice, and it was to this august group that I threw out my questions.

I was not disappointed; within just a few minutes, Louise Norris wrote back with a link to the relevant IRS notice, which included this Q&A:

12. Are US citizens living abroad subject to the individual shared responsibility provision?

Yes. However, U.S. citizens who live abroad for a calendar year (or at least 330 days within a 12 month period) are treated as having minimum essential coverage for the year (or period). These are individuals who qualify for an exclusion from income under section 911 of the Code. See Publication 54 for further information on the section 911 exclusion. They need take no further action to comply with the individual shared responsibility provision

So it would appear that she (and her father) are in the clear, at last for now. But one wonders how many other ex-pats and the like will be caught up in the ObamaTax net as the full force of the law comes online next week.
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