How can I get a job without pushing my family's income into a higher tax bracket?

Question

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.

Answer 1

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.

Answer 2

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.

Answer 3

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!

Answer 4

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.