New Bill Shields Teen Wages from Health Insurance Subsidy Cuts: Dependent Earnings Get a Pass

The Dependent Income Exclusion Act of 2025 is a clear win for families using the health insurance Marketplace. Simply put, this legislation changes how your household income is calculated for the Premium Tax Credit (PTC)—the subsidy that makes your monthly premiums affordable. It allows you to exclude the wages or self-employment income earned by certain dependents, meaning that money won't count against your eligibility for health insurance help.

The Working Kid Exception

Under current rules, if your teenager gets a summer job or a part-time gig during the school year, their earnings get dumped into your household income total. That extra income can sometimes push your family over the subsidy cliff, causing you to lose hundreds of dollars in health insurance credits. This bill fixes that by allowing you to ignore the income of dependents who were under age 18 by the end of the tax year. It also extends this break to dependents under age 24, provided they were enrolled in a qualified job-training or registered apprenticeship program for at least five months of the year. This is a smart move that encourages young adults to pursue skilled trades and training without penalizing their parents’ healthcare access.

The 15% Cap and the Catch

While this is a significant relief, it’s not a blank check. The bill places a limit on how much dependent income you can exclude: it can’t exceed 15 percent of your own Modified Adjusted Gross Income (MAGI). For example, if your MAGI is $50,000, you can only exclude up to $7,500 of your dependents’ earnings. If your dependent makes more than that, the excess still counts toward your household income. This is the bill’s way of targeting relief toward modest earnings, like a part-time job, while ensuring the subsidy system remains focused on lower- and middle-income families.

The Medicaid Maze in Non-Expansion States

Here’s where things get a little complicated, especially if you live in a state that hasn't expanded Medicaid. The bill includes a special protective clause: the income exclusion for dependents only applies if counting that income wouldn't drop your household income below 100 percent of the federal poverty line (FPL). This is designed to prevent a bizarre scenario where excluding income makes your family look so poor on paper that you fall into the "Medicaid gap"—a state of being ineligible for Marketplace subsidies because, theoretically, you should qualify for Medicaid (even though, in non-expansion states, you don’t). This provision is a necessary safety net, but it does mean that in non-expansion states, calculating your final eligibility will involve an extra step to ensure you stay above the 100% FPL threshold.

What This Means for You

If you’re a parent whose college student is earning money through an apprenticeship or whose high schooler is working to save for a car, this bill means their hard work is less likely to cost you your health insurance subsidy. It removes a financial barrier that often forced families to choose between their kids gaining work experience and maintaining affordable health coverage. The change applies to tax credits claimed in tax years starting after the law is enacted. Just remember that if you receive advance payments of the PTC, you will need to report the amount of income you excluded from your dependents’ earnings to keep things consistent with the IRS.