Health Care

Health Care

How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.

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J1
Pioneer
Posts: 2
Registered: ‎02-02-2014

Healthcare Tax Credit

I had Obamacare in 2016. My estimated income was within the limits to take the credit towards my insurance payment when I applied in 2015. However, in September 2016 I lost my job and of course, my income changed. While in the midst of finding a new job and paying bills I forgot to report this change to the Marketplace. How will my income be adjusted according to the credit I was eligible for before losing my job? Will I have to pay back all the credit I received since according to my end-of-the-year income I didn't make enough money compared to my estimation? 

When I enter this information into HR Block it tells me I am owed money, how is that possible if my income didn't meet the requirements for the insurance tax credit that I already received????

Tax Pro
Posts: 5,780
Registered: ‎02-23-2016

Re: Healthcare Tax Credit

Hi J1,

 

Welcome to the community.

 

Health insurance is one of my areas of expertise and I'll be glad to assist you with this.

 

What was your income for the entire year for 2016?  This figure is what the ACA premium tax credit is based on.  If your income was a little bit lower than expected because you didn't work for the last three months of the year then you wouldn't necessarily have lost eligibility but rather you would have been eligible for additional refundable premium tax credit on your tax return because your income was lower then expected due to unforeseen circumstances.

 

In other words, the amount of credit you are eligible for is reconciled on your Form 8962 and that is the official determination of eligibility.  What you report to the marketplace is just an estimation.  I don't believe you will have to repay anything.  Usually it's when you underestimate your income that you have to repay some of the credit.

 

I hope that I've been of help and if you have any other questions please ask me.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 4
Registered: ‎04-10-2014

Re: Healthcare Tax Credit

Sorry if this is in the wrong place but I am confused with this tax credit/subsidy for healthcare. I am losing my BCBS grandfathered plan this year  so filled out the application on line to see if I qualify. I am sole proprietor of my business and income on line 22 (1040) for 2016 was  12K and AGI was 2K.  My wife is on SSI at 72 years and her income didn't reflect on line 22 when filed but was added to mine as income for next year and I qualified for a tax credit on their site.  Why is this and is line 22 the number they go by or is it line 37 AGI?  Is a subsidy the same as tax credit and is counted as income and taxed? So confused.   Married filing jointly no dependents.

Tax Pro
Posts: 5,780
Registered: ‎02-23-2016

Re: Healthcare Tax Credit

Hi 252gregb,

 

 

Welcome to the H&R Block community.

 

The income figure that is used to determine whether or not you qualify for the premium tax credit is the total of all of your income, both taxable and non-taxable items.  Specifically it's equal to your adjusted gross income plus any tax exempt interest & non-taxable social security benefits.

 

The premium tax credit (subsidy) is to help you pay for health insurance.  It is not taxable income to you.

 

The way the premium tax credit works is that the government will pay it to your insurance company for you and then you will reconcile your eligibility on Form 8962 when you complete your tax return for the year.  When you apply for your policy and your premium tax credit you have to estimate your income for the year you are applying for.  If your income for the year ends up being less than you estimated you get additional credit on your tax return.  If your income for the year ends up being more than what you estimated then you'll end up repaying some of the credit that was paid on your behalf in advance.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)

Valued Pioneer
Posts: 4
Registered: ‎04-10-2014

Re: Healthcare Tax Credit

Thank you for the quick and easy to understand reply Louis. You are a real gem with your wealth of knowledge and generous sharing of information. 

Tax Pro
Posts: 5,780
Registered: ‎02-23-2016

Re: Healthcare Tax Credit

You're quite welcome.

Valued Pioneer
Posts: 4
Registered: ‎04-10-2014

Re: Healthcare Tax Credit

So if you overestimate your income and have left over tax credits at year end what happens or if you use only a part of the premium tax credit to enroll in a plan? I understand if you make more than estimated it has to be paid back but not making less how it works out.  Is it best to use all available tax credit when choosing a plan? Thanks in advance.

Highlighted
Tax Pro
Posts: 5,780
Registered: ‎02-23-2016

Re: Healthcare Tax Credit

252gregb,

 

 

You have to use all premium tax credit awarded in advance to go towards paying for your insurance policy.  They automatically apply it for you.

 

You get refundable credit back on your tax return if you overestimate your income because when you overestimate your income you're getting less credit than you're eligible for in advance.