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What happens if my income changes and my premium subsidy is too big? Will I have to repay it?

If premium subsidy recipients end up earning more than anticipated, they could have to pay back some of their subsidy. | Image: Andrey Popov / stock.adobe.com

Q. What happens if my income changes and my premium subsidy is too big? Will I have to repay it?

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Use our calculator to estimate how much you could save on your ACA-compliant health insurance premiums.

A. Monthly premium subsidy amounts (ie, the advance premium tax credit – APTC – that’s paid to your insurer each month to offset the cost of your premium) are estimated based on prior-year income and projections for the year ahead, but the actual premium tax credit amount to which you’re entitled depends on your actual income in the year that you’re getting subsidized health insurance coverage.

If recipients end up earning more than anticipated, they could have to pay back some of the subsidy. This can catch people off guard, especially since the tax credits are paid directly to the insurance carriers each month, but if overpaid, they must be returned by the insureds themselves.

The issue of reconciling APTCs was explained in a 2013 IRS publication (see the final column on page 30383, continued on page 30384) which clearly explains that they do expect people to pay back subsidies that are in excess of the actual amount for which the household qualifies.

But the portion of an excess subsidy that must be repaid is capped for families with incomes up to 400 percent of federal poverty level (FPL). Details regarding the maximum amount that must be repaid, depending on income, are in the instructions for Form 8962, on Table 5 (Repayment Limitation). These amounts are adjusted annually, but for the 2020 tax year, the repayment caps range from $325 to $2,700, depending on your income and your tax filing status (single filer versus any other filing status). GOP lawmakers considered various proposals in 2017 that would have eliminated the repayment limitations, essentially requiring anyone who received excess APTC to pay back the full amount, regardless of income. But those proposals were not enacted.

There are some scenarios in which repayment caps do not apply:

  • If a person projected an income below 400 percent of the poverty level (and received premium subsidies during the year based on that projection) but then ends up with an actual income above 400 percent of the poverty level (ie, not eligible for subsidies), the entire subsidy amount that was paid on their behalf has to be repaid to the IRS.
  • If a person projected an income at or above 100 percent of the poverty level (and received premium subsidies) but then ends up with an income below the poverty level (ie, not eligible for subsidies), none of the subsidy has to be repaid. This is confirmed in the instructions for Form 8962, on page 8, in the section about Line 6 (Estimated household income at least 100% of the federal poverty line). But there are new rules as of 2019 that make it less likely for people with income below the poverty level to qualify for premium subsidies based on income projections that are above the poverty level. This is explained in more detail here.

Is there any help for me if I have to repay premium subsidies?

The IRS noted that they would “consider possible avenues of administrative relief” for tax filers who are struggling to pay back excess APTC, including such options as payment plans and the waiver of interest and penalties for people who must return subsidy over-payments. If you find yourself in a situation where you must pay back a significant amount of the premium subsidies you received during the prior year, contact the IRS to see if you can work out a favorable payment plan/interest arrangement.

It’s also worth noting that contributions to a pre-tax retirement account and/or a health savings account will reduce your ACA-specific modified adjusted gross income, which is what the IRS uses to determine your premium tax credit eligibility. If you had HSA-qualified health coverage during the year, you can make HSA contributions up until the tax filing deadline the following spring. And IRA contributions can also be made up until the tax filing deadline. You’ll want to talk with your tax advisor to see what makes the most sense given your specific circumstances, but you may find that some pre-tax savings end up making you eligible for a premium subsidy afterall, or reduce the amount that you’d otherwise have to repay.

The COVID pandemic caused widespread financial uncertainty and employment upheavals throughout much of 2020. Additional federal unemployment benefits were provided to millions of people, but there are concerns that the premium tax credit reconciliation could be particularly challenging during the 2021 tax filing season, with many people having to repay subsidies that were paid on their behalf during a time they were unemployed in 2020.

In December 2020, insurance commissioners from 11 states sent a letter to President-elect Biden, recommending various immediate and long-term actions designed to improve access to health coverage and care. One of the short-term recommendations is to provide relief from subsidy claw-backs for the 2020 tax year. Even in the best of times, it can be challenging to accurately project your income for the coming year, but the uncertainty caused by the COVID pandemic made this much more challenging than usual. So it’s possible that the Biden administration and/or Congress might be able to take action to provide some relief in this area, for at least the 2020 tax year.

What if you get employer-sponsored health insurance mid-year?

Most non-elderly Americans get their health coverage from an employer. Individual health insurance is great for filling in the gaps between jobs, but what happens if you start off the year without access to an affordable employer-sponsored health insurance plan, and then get a job mid-year that provides health coverage?

If a premium subsidy was paid on your behalf during the months you had individual market coverage, you may end up having to repay some or all of the subsidy when you file your tax return. It all depends on your total income for the year, including income from your new job. If your total income still ends up being in line with the estimate you provided when you applied for your subsidy, you won’t have to pay that money back. But if your actual income for the year ends up being substantially higher than you initially projected, you may end up having to repay some or all of that subsidy when you file your taxes.

It doesn’t matter that your income was lower when you were covered under the individual market plan. In the eyes of the IRS, annual income is annual income — it can be evenly distributed throughout the year, or come in the form of a windfall on December 31. (As noted above, insurance commissioners have urged the Biden administration to consider ways of providing relief on this issue for the 2020 tax year, given that it was even more challenging than normal to accurately project an annual income during the COVID panemic).

Once you become eligible for an affordable health insurance plan through your employer that provides minimum value, you’re no longer eligible for premium subsidies as of the month you become eligible for the employer’s plan. But premium tax credit reconciliation is done on a month-by-month basis, so as long as your total income for the year is still in the subsidy-eligible range, you’ll almost certainly still be eligible for at least some amount of subsidy for the months when you had a plan that you purchased through the exchange.

Finally, if you’re offered health insurance through an employer that you feel is too expensive based on the share you have to pay, you can’t just opt out, buy your own health plan, and attempt to snag a subsidy. The fact that an affordable plan (by IRS definitions) is available to you renders you ineligible for money toward your premiums. Unfortunately, the cost of obtaining family coverage is not taken into consideration when determining whether an employer-sponsored plan is affordable, which leaves some families stuck without a viable coverage option.

How many people have to repay premium subsidies?

For 2015 coverage, subsidies were reconciled when taxes were filed in early 2016. The IRS reported in early 2017 that about 3.3 million tax filers who received APTC in 2015 had to repay a portion of the subsidy when they filed their 2015 taxes; the average amount that had to be repaid was about $870, and 60 percent of people who had to pay back excess APTC still received a refund once the excess APTC was subtracted from their initial refund. [IRS data for premium tax credit reporting is available here; as of 2019, data had only been reported for the 2014 and 2015 tax years.]

But on the opposite end of the spectrum, about 2.4 million tax filers who were eligible for a premium tax credit ended up receiving all or some of it when they filed their return. These are people who either paid full price for their exchange plan in 2015 but ended up qualifying for a subsidy based on their 2015 income, or people who got an APTC that was less than the amount for which they ultimately qualified. The average amount of additional premium tax credit paid out on tax returns for 2015 was $670.

[The IRS noted that it was very uncommon for people to pay full price for their coverage and wait to claim their full refund on their return: 98 percent of the people who claimed a premium tax credit on their return had received at least some APTC during the year.]


Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Robin
Robin
1 year ago

I was in formed by my I seance that I no longer receive a subsidy for my insurance premium and now they are telling me I own 1700 a month for the insurance. I have been receiving a subsidy for a few years and it always carried over I don’t understand what changed this year. I did not change companies either

Louise Norris
Louise Norris
1 year ago
Reply to  Robin

Hi Robin,
I’d need more details to tell you exactly what happened with your subsidy. It’s based on your age, your zip code, the number of people in your tax household (and how many of them are enrolling in the plan), and your income. You can play around with our subsidy calculator to see how changing those factors affects the subsidy amount: https://www.healthinsurance.org/obamacare/subsidy-calculator/
From one year to the next, your subsidy eligibility and amount can change if the cost of the benchmark plans (second-lowest-cost silver plan) in your area changes. So it’s possible that a new, lower-cost insurer entered the market in your area, reducing premium subsidies for everyone.

Waltlasher@ymail
Waltlasher@ymail
1 year ago

To whom it may concern…
My wife is disabled, and it took 3 years for her to qualify for benefits which left us in a tough situation living on one income,further complicated by the fact that l could qualify as disabled myself but both of us could not have survived without at least one person working. So we somehow made it through,but now must spend a large portion of her back pay repaying the subcity that was extended to us! What can we do to minamize the damages without distroying our credit scores? And falling back into debt again.

Louise Norris
1 year ago

This is a tough situation. My best recommendation is that you reach out to the IRS directly and ask them to help you establish a payment plan that will allow you to repay the excess premium tax credit on terms that will work with your finances. Excess premium tax credits can be collected by the IRS just like any other tax debt (unlike the individual mandate penalty, which has much more limited collection procedures), but the IRS has shown a willingness to work with tax filers to make it manageable: https://www.treasury.gov/tigta/auditreports/2016reports/201633071fr.pdf

Lorraine J Costanzo
Lorraine J Costanzo
1 year ago

I underestimated my income for Healthcare subsidy by $4796. I estimated income at $16800. and it turned out to be $21872. because I worked 2 months before retiring.. will I have to payback the whole subsidy or the $4796. ?? I can’t believe I’ll be in debt again over this ! Thank you for your help.

Louise Norris
Louise Norris
1 year ago

Hi Lorraine,
You should only have to pay back at most $300 of your subsidy. You’ll use Form 8962 to reconcile your subsidy when you file your taxes. The instructions for that form are here: https://www.irs.gov/pub/irs-pdf/i8962.pdf (see Table 5 on page 16 of the instructions). The form will help you to calculate what your subsidy should have been (based on an income of $21,872), and then they’ll compare it with the subsidy that was paid on your behalf during the year. They do have a repayment requirement if it turns out that your subsidy was too large, but they have caps on how much they make you repay.
If your income was under 200% of the poverty level and you’re a single tax filer, the maximum they’ll make you pay back is $300 (that’s detailed in Table 5 of the instructions for Form 8962). For reference, 200% of the poverty level for 2019 coverage for a single person was $24,280.

Lorraine J Costanzo
Lorraine J Costanzo
1 year ago
Reply to  Louise Norris

Thank you so much for the reply !

Michelle
Michelle
1 year ago

So, last year I had mass health for part of the year, but then I ended up earning way more than I thought I was going to for the entire year. So pretty much I shouldn’t have had mass health but forgot to report my earnings. Am I going to be fined on my taxes and if so what will happen?

Jack
Jack
1 year ago

Am I correct with that understanding that the tax credit is based on the total yearly income and not just the months I needed marketplace coverage? I worked a temp job for a few months and enrolled in the marketplace. My income for those months was accurately reported. However, when I was found a full-time job with insurance I no longer needed the marketplace and my income went up. Now it appears I have to repay the tax credits even though when I was enrolled in the marketplace my income made me eligible. Seems the tax credits and my income should only be based on the months I was enrolled in the marketplace.

Louise Norris
1 year ago
Reply to  Jack

Eligibility for Medicaid is calculated in real-time, based on current monthly income. But it’s different for premium subsidies. They’re a tax credit, and they have to be reconciled on your tax return based on your total annual income. They do prorate it on a monthly basis, so it’s possible to get a premium tax credit for just a few months, as long as your total income for the year doesn’t exceed 400% of the poverty level. But if you exceed that threshold, there’s no premium subsidy available, even if you earned all of your income during just a small portion of the year.

Jack
Jack
1 year ago
Reply to  Louise Norris

Very helpful. Thank you!

Stephanie
Stephanie
1 year ago
Reply to  Louise Norris

How does that work? My husband was out of work for 8 months and purchased health insurance for those 8 months for which we received a tax credit. Once he was employed we terminated the insurance. His employment and my new job with a higher salary has us looking at repaying most of that tax credit even though our income was very low during those months.

Stephanie
Stephanie
1 year ago
Reply to  Stephanie

I should clarify that my new job started AFTER we terminated the insurance.

Louise Norris
Louise Norris
1 year ago
Reply to  Stephanie

It’s frustrating to be in that situation, for sure. But it’s a tax credit based on annual income, regardless of when the income is earned during the year. If they hadn’t made it an advanceable tax credit, people would have had to wait until they filed their tax return to claim any of it. But it would be unrealistic to expect most people to be able to front the whole cost throughout the year, and then get the whole tax credit as a refund from the IRS. So they allow people to take it in advance, throughout the year – but the downside is that it still has to get reconciled on tax returns based on total annual income when the year is over.
As long as your income didn’t end up exceeding 400% of the poverty level (and it sounds like it didn’t, since you said repaying most, but not all of the tax credit?), the IRS has a limit on how much you have to repay. See Table 5 on page 16 of the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf

Dawn
Dawn
9 months ago
Reply to  Jack

Unfortunately, this exact same scenario just happened to me and my husband. We had a significantly different income while using the subsidies. As soon as our income changed and my husband found another job, we stopped ACA, but we just found out we still have to pay based on our income for the year whether we stopped it or not. Very disheartening to find out how much we now owe the IRS for just 3 months of coverage.

Louise Norris
Louise Norris
9 months ago
Reply to  Dawn

I’m sorry you’re in this situation, Dawn. This is indeed one of the more frustrating aspects of the premium subsidy system, since it can be challenging to accurately predict income for the whole year when an employment situation is in flux.
Some people find that it’s easier to understand the repayment of excess subsidies if they keep the perspective that the subsidy is just a tax credit. If it worked like other tax credits and could only be claimed on a person’s tax return, there would be no subsidy for a person whose income ended up above 400% of the poverty level for the year, regardless of how low their income was during the time they had a plan through the exchange.

MaryAnn
MaryAnn
7 months ago
Reply to  Dawn

It’s outrageous Dawn and a complete rip off. You have to pay for the insurance. It only seems to benefit the very poor.

Maryann
Maryann
7 months ago
Reply to  Jack

Jack, I am in the same situation. My income for the first six months through June was $29,000. In July I reported an increase in income. I estimated it to be maybe around $47,000. I decided to cancel it on October 9th, because I was not being given correct information and I was afraid of paying money back. No one told me that I could not go over $49,000 for the year as a single person. I thought after I cancelled, I would not have to include Nov through Dec income which put me over… part of it included unemployment. Seems so unfair. Now, I have to pay back the entire amount of $8,000. I am so angry over this. It is so unfair and has put me in considerable debt at my age of 62. And what is even worse, is I never used the insurance. How is this helping people. It’s unfair. People should be told up front what amount they can not go over.

George L Taylor
George L Taylor
4 months ago
Reply to  Maryann

The exact thing has happened to me!!! Paying back all of my 8000 subsidy! What a mess!!! Going to have to set up a payment plan… who has 8000 just laying around!

Sherri
Sherri
4 months ago
Reply to  Jack

We are wondering about this too. The first 4 months of the year my husband had a job with no insurance. We qualified for tax credits based on the income he had. He got a new job with insurance beginning May 1 so I reported a life and income change and cancelled the HC insurance. Because our income was higher we are being told we have to pay back those 4 months of credits. I don’t see how this is right if you report a life change and be penalized for making more money!! I think it should only be based on the first 4 months.
Can this be explained?

Joyce
Joyce
1 year ago

We went over the poverty level by just a couple of thousands. We are self-employed and underestimated our income, now the IRS is making us pay back over $12000.00 for one year and $14000.00 for another year. We can’t pay that much back at one time and now they are charging penalties and interest on top of that and we will never get this paid off. Is there any help with this?

Louise Norris
Louise Norris
1 year ago
Reply to  Joyce

Hi Joyce,
This is a tough situation, for sure. I assume you meant you went over 400% of the poverty level, and thus have to pay back the entire subsidy? If one of the years in question is 2019, you may still be able to reduce your MAGI to get it into the subsidy-eligible range by making contributions to your retirement accounts. Here’s how that works: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/
For years before 2019, I don’t think there’s much you can do to change your income or the subsidy repayment amount. But you can reach out to the IRS directly and ask them to set up a payment plan that’s workable.

Brandi Trella
Brandi Trella
1 year ago

For a family of 3 we only used the APTC for 4 months. We were anticipating making 62,000 but I got a new job and we made 72,000. this still puts us at 357% of poverty level. What will we owe?

Louise Norris
Louise Norris
1 year ago
Reply to  Brandi Trella

When you complete Form 8962, you’ll figure out what your premium tax credit should have been, based on 357% of the poverty level. You’ll have to repay the difference to the IRS. But with an income of 357% of the poverty level, the most you’ll have to repay is $2,650, regardless of how much your APTC overage actually ended up being — see Table 5 in the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf

Tony
Tony
1 year ago

Hi, I overpaid for my Obamacare, not underpaid. I thought my annual income would be more than double what it actually was. Will I get a big tax refund as a result?

Louise Norris
Louise Norris
1 year ago
Reply to  Tony

The amount of your subsidy will be adjusted to reflect your actual income when you file your taxes. As long as your income was still in the subsidy-eligible range (ie, not so low as to be Medicaid-eligible), the additional premium tax credit that you should have received will be given to you by the IRS as a lump sum. Assuming we’re talking about 2019, this subsidy calculator tool will show you what your subsidy amount should have been, so you can get an idea of how much you might receive: https://www.kff.org/interactive/subsidy-calculator-2019/
You’ll use IRS Form 8962 to reconcile your premium tax credit, so that’s how the official numbers will be calculated.
If it turns out that your income was actually low enough to be Medicaid eligible, the IRS won’t make you pay back your subsidy, but you won’t get any extra subsidy on your tax return either. Here’s more about that: https://www.healthinsurance.org/faqs/if-my-income-is-less-than-expected-this-year-i-might-be-eligible-for-medicaid-what-can-i-do-during-open-enrollment-to-cover-my-bases/

wendy
wendy
1 year ago

We had the subsidy for 2018 for the entire year, but in November a family property that my brother and I inherited , which was sold , but owner financing. The new owner decided to pay the loan off-which but us way over 400%- we now owe the entire subsidy back $32,000.00. We would not of had insurance for those previous months, but for the unexpected sale we are penalized. We would not mind just having to pay back for the two months, but it is not fair to pay for the entire year.

Louise Norris
1 year ago
Reply to  wendy

I’m sorry you’re in a tough spot with this. But the premium subsidy is a tax credit and eligibility is based on your annual income — regardless of whether that income comes in steadily throughout the year, or in a lump sum. The way the IRS (and the ACA) looks at it, your income for the year ended up being high enough that you can afford to pay for coverage on your own, without a tax credit.
In reality, that might be far from the truth… I don’t know the specifics in terms of how much your income actually ended up being for the year, but your health insurance was clearly a substantial expense if the subsidy alone (in addition to the part you paid throughout the year) amounted to $32,000.
Democrats in Congress generally support measures that would cap health insurance premiums (for a benchmark plan) at no more than 8-10% of household income, regardless of how high that income ends up being. This would be great for people whose income is a little more than 400% of the poverty level, as they currently receive no assistance at all (unless they’re in California: https://www.healthinsurance.org/california-state-health-insurance-exchange/#subsidyandmandate ).
Currently, it’s not uncommon to see people with income a little above 400% of the poverty level who have to pay more than 25% of their annual income for health insurance. The “subsidy cliff” is a very real phenomenon: https://www.healthinsurance.org/obamacare/beware-obamacares-subsidy-cliff/
But if a flat percentage of income cap were imposed, it would help people with income well above 400% of the poverty level. As an example, if benchmark premiums for a household amounted to $40,000 for the year, they would receive at least some sort of premium subsidy as long as their income didn’t exceed $400,000 for the year (assuming a 10%-of-income cap were to be implemented).

Paula
Paula
1 year ago

We have to pay back the APTC and have a payment arrangement. I notice the IRS is adding penalties and interest. I thought it was determined the ACA could not be considered a tax; and, therefore, would not be treated as such. How are they charging interest and penalties?

Louise Norris
Louise Norris
1 year ago
Reply to  Paula

The Supreme Court ruled in 2012 that it is a tax, and is thus constitutional because it’s within Congress’s powers of taxation (here’s that ruling: https://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf ) — Incidentally, this is the crux of the current lawsuit in which 18 GOP-led states are seeking to overturn the entire ACA (including the protections for people with pre-existing conditions, and the subsidies the law provides). They’re arguing that without the tax (which was eliminated at the start of 2019), the individual mandate is unconstitutional, and thus the entire law ought to be overturned.
But getting back to the penalty/tax. Even though SCOTUS ruled that it is a tax, the IRS can’t use their normal enforcement mechanisms. They cannot use liens, levies, or criminal prosecution to collect the money (but penalties and interest can be added, so it’s to your advantage to pay it sooner rather than later; unpaid amounts will also be withheld from any future tax refunds that you might be owed). Here’s more about enforcement/collection works: https://www.healthinsurance.org/faqs/ive-heard-that-the-government-wont-really-be-able-to-enforce-the-penalty-for-not-having-health-insurance-is-this-true/

Dean
1 year ago

I will lose my employer health care in May (year 2020) and will decide to enroll in Obamacare at that point. I will qualify for a subsidy on my premiums based on my current projected income. However this coming December, (year 2020) I will take a retirement distribution from my 401K (to buy a house) that will put my income over the 400 percent of the poverty level to receive a subsidy for the year. Now at the end of the year, will I have to pay back all of the tax credit from May to the end of the year or just for the month of December?

Louise Norris
Louise Norris
1 year ago
Reply to  Dean

We always recommend that you consult with a tax advisor about your specific circumstances. But as general background, premium tax credit eligibility is based on your income for the full year. (Note that income refers to an ACA-specific MAGI calculation: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ ).
If your MAGI goes over 400% of the poverty level (based on the *prior* year’s poverty level numbers), you ultimately won’t be eligible for any subsidy at all for the whole year, which means you’d have to pay it all back. This is true even if all of your income is received on the last day of the year.

Al Badoux
Al Badoux
1 year ago

I qualified for tax assistance and joined the Marketplace Health Care Plan as of January 2019. In December 2019 I received a back pay settlement check from the government for my disability claim which was filed mid 2016. Upon filing 2019 taxes I was told I need to repay $9000.00 to cover the subsidies. I have no issues paying from the date I became “Unqualified” for help (Dec 2019) but dont feel I must pay for the previous 11 months as I was intact qualified low income. Any thoughts on this ??

Louise Norris
1 year ago
Reply to  Al Badoux

Unfortunately, there’s not really a way around this. Premium subsidies are a tax credit based on annual income (as opposed to Medicaid eligibility, which is based on monthly income). With other income-based tax credits, eligibility is determined after the end of the year, when you file your tax return and your income for the year is known. But people are allowed to take their premium tax credits in advance, throughout the year, paid directly to the insurance companies (there is also an option to pay full price and just claim the tax credit on your tax return, the way you would with any other tax credit – but most people don’t do that, because they wouldn’t be able to afford to pay their premiums without the up-front assistance from the tax credit).
So when the year is over and you file your tax return, the IRS looks to see if you were eligible for a premium tax credit, and if so, how much it should be. Most people who are eligible for the tax credit do take it in advance, so the IRS has to reconcile the amounts when people file their tax returns. And in some cases, people end up receiving a substantial amount of income at the end of the year, which changes their subsidy eligibility quite a bit (see comments above for other examples of this).
This is a tough spot to be in, but it’s easier to understand when you realize that the premium subsidies are a tax credit based on the entire amount of income you have for the whole year. Assuming you’re eligible for a subsidy based on your annual income, you can spread it out across the year to cover part of the premium for each month that you had coverage through the exchange. But if your annual income makes you ineligible for the tax credit altogether, you can’t take it for any months of the year, even if all of most of your income came in the final months of the year.
If you’re having a hard time paying back the premium tax credit, you can reach out to the IRS to see if they can set up a payment plan that will work with your budget.

MaryAnn
MaryAnn
7 months ago
Reply to  Louise Norris

it is very unfair. This Market place is designed to benefit the government or the very poor, not the middle class. We have no recourse to negotiate to even pay a portion back. This is seriously putting people in debt, and no one is explaining how this works until tax time comes. I will never apply for Obama Care again.

Terra Lynn Stringfellow
Terra Lynn Stringfellow
1 month ago
Reply to  MaryAnn

No Market place has put me in a disastrous situation! Because of unemployment stimulus it caused me to go over the 400 percentage. I reported my increase of unemployment when I started recieving but I did not report the 600-300 stimulus part. Now when filing 2020 taxes,I have a 11000 tax bill along with extensive medical bills,a part time job and SSI! I am completely overwhelmed,I’ve never owed so much before to anyone!!

Louise Norris
Editor
27 days ago

I’m sorry you’re in this situation, Terra. I wrote about this sort of scenario last fall: https://www.healthinsurance.org/faqs/how-could-covid-19-financial-relief-affect-my-income-taxes-for-2020/
Insurance commissioners from several states have asked the Biden administration to implement one-time relief from subsidy repayments due to the complicated financial situations people had in 2020: https://www.healthinsurance.org/blog/2020/12/30/the-scoop-health-insurance-news-december-30-2020/#recommendations It’s unclear whether that will come to fruition or not, but we’re keeping an eye on it. In the meantime, we recommend that you reach out to a tax advisor to see if there’s anything that can be done to get your income into the subsidy-eligible range. One possible option might be contributions to a retirement plan, if you’re able to do so: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

Louise Norris
Editor
26 days ago

Terra,
Just following up to let you know that the COVID relief plan unveiled today by the House Ways and Means Committee does include a provision that would prevent people from having to repay excess premium subsidies from 2020. See Section 9962: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/7.%20Tax_sxs.pdf You might want to reach out to your Representative and Senators to let them know your thoughts on this issue.

Alexei Schnakenburg
Alexei Schnakenburg
7 days ago
Reply to  Louise Norris

Hi Louise,
This is fantastic news! I was unemployed for roughly the first bit of 2020 and was receiving subsidies. I have a disability and require high-quality insurance for my medical treatments and this meant the subsidies were quite substantial. Then I got a job for the rest of the year that, in addition to covid boosted unemployment and stimulus, put me just over 400% for the year. I canceled my plan once I got insurance through my employer, and feel the current policy is penalizing me for getting a job. It would be amazing if they waive the penalty for 2020, especially as it was only federal stimulus that boosted me over 400%. One thing that seems unfair is that now I am facing an additional tax penalty for tax underpayment. Is this related to the premium issue or specific to me waiting until tax season to pay taxes on my unemployment as I was unsure of my ability to survive on the unemployment checks? Thanks.

Louise Norris
Editor
6 days ago

Issues like tax underpayment penalties are well beyond my area of expertise. But my understanding is that the IRS does impose a penalty if you didn’t pay enough in taxes throughout the year to cover at least 90% of the total tax bill (or 100% of your prior year’s tax bill, which can be a failsafe in case your income increases significantly from one year to the next). That would be unrelated to your health insurance premiums, unless the loss of the premium tax credit is what’s pushing your tax bill into a level that’s triggering the underpayment penalty.
I recommend that you check with a tax advisor to see if they have any specific recommendations for your situation. Also, if you haven’t already made contributions to a traditional IRA for 2020, that might be an option that could help to get your income into the subsidy-eligible range, regardless of COVID-specific legislation: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

Randy
Randy
1 year ago

I was unemployed for the first 5 months last year and received 4200 in subsidies for that period. I was hired in May and cancelled Obama care in June and didn’t receive anymore subsidies. I went on to earn 32K the remainder of the year. What will I owe?

Louise Norris
1 year ago
Reply to  Randy

I assume you projected an income of some amount for the year (even though you weren’t making an income for the first part of the year?) since you were found to be eligible for premium subsidies, which generally require an income of at least the poverty level. But reconciling your subsidy on your tax return is going to depend on how much your actual income for the year differs from the income that you projected when you enrolled in the health plan.
If your actual income ended up quite a bit higher than you had projected, you’ll have to pay back some of the subsidy that was paid on your behalf — but likely not all of it, assuming the $32k was your only income for the year. The IRS has caps on how much of the subsidy you have to repay, as long as your income stays under 400% of the poverty level. The details are in the instructions for Form 8962, which is the form that you’ll use to reconciled your premium tax credit on your tax return: https://www.irs.gov/pub/irs-pdf/i8962.pdf

MaryAnn
MaryAnn
7 months ago
Reply to  Louise Norris

Once the insurance is cancelled, the money made up to that point should be considered, not the entire year. Many people are contractors and it is impossible to predict income for the year. So unfair.

j ab
j ab
1 year ago

will my inheritance from my dad affect my MAGI

Louise Norris
Louise Norris
1 year ago
Reply to  j ab

We recommend that you consult with a tax advisor who can give you detailed advice based on your specific circumstances. But in general, the federal estate tax is only applicable to multi-million dollar estates, and there’s not a federal inheritance tax: https://www.bankrate.com/taxes/do-you-have-to-pay-tax-on-inheritance/ But if you inherit assets which you then sell, you might end up with capital gains, which would be added to your income and thus increase your MAGI.
It will basically come down to whether or not your AGI is affected by the inheritance. If it is, then your MAGI is likely to also be affected, as ACA-specific MAGI is your AGI plus three additional items, if you have them: http://laborcenter.berkeley.edu/pdf/2019/magi.pdf

j ab
j ab
1 year ago

thank you

Mark
Mark
1 year ago

My tax program calculates that I have to pay an additional $1600 due to a higher income than expected. I understand this part. What I don’t understand is how to actually repay the government. Will this be deducted from my tax refund (slightly over $2000)? Or do I need to write a check?

Louise Norris
Louise Norris
1 year ago
Reply to  Mark

If you’re otherwise owed a refund, the repayment of the premium tax credit will just be subtracted from your refund. The subsidy is just like any other refundable tax credit, in that it will add to your refund if the credit paid on your behalf during the year was too small, and it will subtract from your refund if the credit paid on your behalf during the year was too large. (and people who wouldn’t otherwise get a refund and also have to pay back some or all of their premium tax credit are required to send the money to the IRS, just as they would with any other outstanding tax debt).

Mark
Mark
1 year ago
Reply to  Louise Norris

I guess my difficulty in understanding is that the 1120 only shows my refund due. You’re saying I just file everything and they IRS will deduct my subsidy correction and only refund the difference? i.e. I’m owed $2000 on the 1120 but I have to repay $1000 in subsidies will result in a $1000 refund check?

Lydia Fernandez
Lydia Fernandez
1 year ago

on my 2019 taxes I will receive a sizable refund, but I was over subsidized on my ACA by $497, will they deduct that from my refund or do I have to pay it back somehow

Louise Norris
Louise Norris
8 months ago

Yes, they will deduct it from the refund you were due to receive. Depending on your income, they may not make you repay the entire amount of the excess premium subsidy. If you earned more than 400% of the poverty level, you’ll have to pay back the entire premium subsidy that was paid on your behalf. But if your income was less than 400% of the poverty level, the amount you have to pay back (ie, have subtracted from your refund) is capped at the amounts shown in Table 5 of the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf (Table 5 is on page 16 of those instructions).

Greg
Greg
1 year ago

I am helping a couple do their taxes. They had insurance through the marketplace. They received their 1095 and it shows that they received healthcare worth 991 a month (with the listed silver plan at 1350 a month). They received a subsidy of $895 per month meaning they only paid $96 a month for insurance. They made more income than expected($90000) AGI putting them a 550% over the poverty line for their family of two. As I understand, they will have to pay back the entire subsidy of $10740($895 times twelve months). Does this seem to be correct?

Louise Norris
Louise Norris
1 year ago
Reply to  Greg

Yes, that’s correct. If their ACA-specific modified adjusted gross income ended up above 400% of the poverty level, they’ll need to repay all of the premium tax credit that was paid on their behalf in 2019.
Here’s how MAGI is calculated under the ACA: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
It’s unlikely that their MAGI can be brought down into the subsidy-eligible range, given how much above it they are. But here’s how that works, just in case: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/ I would recommend that they consult with a CPA, who might be able to find a way to make it work for them.

Mo
Mo
1 year ago

I was a student in college and under my parents insurance. I graduated and got a 60K job but continued to be under my parents insurance. Our tax person did not educate us of all these inusrance tax credit issues. 2 years later the IRS sends me a letter stating i owe them $30,000 (you read that right) for using obamacare in 2017 and 2018. Funny thing is i never used the insurance. I was 25 years old in 2017 and 26 in 2018, so i was eligible to use my parents insurance. Is there any way i can fight this?

Mohammed Hussain
Mohammed Hussain
1 year ago
Reply to  Mo

Worth to note that my tax accountant mentioned since i was 26 and younger, my dad is the primary insurace holder so he recieved all the premium credit. Since my father is low income, we should not owe anything. But the IRS is still coming after me. Any help is appreciated.
Thank you for this website. I searched the internet and this is the most useful info i could find.

Louise Norris
11 months ago

This is a tough situation, and I’m sorry you’re stuck in it! I’m guessing that your income combined with your parents’ income in 2017/2018 would have been more than 400% of the poverty level (ie, $81,680 in 2018)? If that’s the case, the household shouldn’t have received a premium tax credit at all if they kept you on the family policy, since your income pushed the household over the upper cap for subsidy eligibility (your parents probably would have been eligible for a subsidy — or possibly Medicaid — if the policy had just covered them, or any other siblings you might have). If the household income was indeed over 400% of FPL, there’s not really any way around the fact that the premium tax credit has to be repaid. But the IRS is generally willing to set up payment plans if you contact them.
When a household has multiple tax returns but just one health insurance policy, the IRS allows the tax filers in the household to allocate the premium tax credit however they choose (details are in the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf just search “allocate” in that document to see examples of how it works). So it’s possible that somehow the tax credit got allocated to your tax return. But if your accountant is saying that the tax credits were reconciled on your father’s tax return, I’m not sure why the IRS is coming after you for repayment.

Mohammed Hussain
Mohammed Hussain
11 months ago
Reply to  Louise Norris

I really appreciate you taking the time to help out and explain things to people who need it the most.
We are a family of 5, all of us were on it. Technically, the combined total income of all 5 was 116K, so below the 120K of 400% for a family of 5. Shouldnt that make a difference?
Last auestion, if i was 26 (2018), was I eligible to be on the family insurance or was i too old?
Again, i am incredibly thankful for you.

Laurie
Laurie
11 months ago

I recieved a withdrawl from my pension, raising my income level. I had medical bills to take care of, and still do with this money I received. Now I have lost my job due to the worldwide virus. Will I still be penalized to pay back the entire amount??

Tom
Tom
11 months ago

Hi – our income exceeded projections by about $15,000 in 2019. We do still qualify for a subsidy but I will need to repay a small amount. My question is in regard to the fact that we had qualified for a zero deductible health plan but now I believe this would not be the case at higher income. Will we have to pay back an amount equal to what the deductible would have been if calculated at the correct income?

Louise Norris
Louise Norris
11 months ago
Reply to  Tom

No. Cost-sharing reductions (CSR) do not get reconciled on tax returns. There is no provision requiring people to pay back anything in regards to cost-sharing reductions they received during the year, regardless of whether their actual income for the year ends up above the cutoff for CSR eligibility.

L S
L S
11 months ago

great info! Our question: self-employed new business that hasn’t made any income yet. We got thrown to medicaid for 2020. We were on track to make income this year but the current economy likely will nix that. If we find some other way to make money this year, under what $ would we have to pay back Medicaid premium? Household of 2, both in our business.

Louise Norris
Louise Norris
11 months ago
Reply to  L S

They don’t require you to pay back anything for Medicaid if your annual income ends up above the Medicaid eligibility threshold. If and when your income bumps up again, you can contact the state Medicaid office to let them know. If your income is above the Medicaid threshold, you’ll then qualify for a special enrollment period to purchase a plan in the exchange, triggered by your loss of Medicaid eligibility. But you won’t have to pay back anything for the time while you were covered by Medicaid. Best wishes for success with your business!

L S
L S
11 months ago
Reply to  Louise Norris

Thank you. I guess what I need to know is that magic date & number…”Medicaid eligibility” level, given that we have incurred business deductions not yet taken due to no sales that would reduce business income variably/ annually before we even see a dime of personal income. If you mean 100-400% poverty level, we could be in & out of that range month to month so indeed, would need to wait to see the whole year’s picture. So can we be penalized by waiting?
The ACA plans have huge deductibles even with PTC that our medical situation would cost us dearly to just make “some” income so a side job might put us in a worse situation than we are in. Since we got thrown to Medicaid, we didn’t get offered any plan with CSR (lower deductibles/co-pays) so I couldn’t see what they might have been. I wondered if they even were still a thing.

Louise Norris
Louise Norris
11 months ago
Reply to  L S

CSR is still available. You can get an idea of how those plans work by using the plan browsing tool for your state’s exchange. You can enter different income levels and see how the available silver plans change. I assume you’re in a state that’s expanded Medicaid, since you mentioned that you’d qualified for Medicaid. So if you enter an income equal to a little more than 138% of the poverty level (but not more than 150%) you’ll see the plans with the strongest CSR benefits. They are much less strong at 250% of the poverty level, which is where they phase out.
With a household of two in a state that has expanded Medicaid, you need to earn at least $23,504 this year as a household of two to qualify for a premium subsidy — below that amount, you’d be Medicaid-eligible. Here’s how household income is determined under the ACA: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ (if you’re in a state that hasn’t expanded Medicaid, your household income needs to be at least $16,910 to qualify for a premium subsidy).
One thing to keep in mind: Medicaid eligibility is determined based on your monthly income, which means you can qualify for Medicaid if your income drops significantly during the year, even if you’ve already earned a substantial amount of money earlier in the year. But premium subsidy eligibility is based on your entire year’s income, and gets reconciled on your tax return based on the actual amount you end up earning for the year. It sounds like your income situation is complicated, and you’ll want to reach out to a tax professional — there are likely tax ramifications that go well beyond health insurance.

Aarika
Aarika
11 months ago

I was self-employed for the first 8 months of 2019, but only earned $1500/mo from my business income. I decided to become an “employee” and close my business in August 2019. When I received health coverage with my employer I informed Marketplace and cancelled coverage. Then I got married October 19th. I Just started working on my taxes last night and the software I’m using informed me that I have to pay back the almost $7000 in subsidies because of my husbands income during the time we weren’t married or living together. How is THAT even possible? I wasn’t even engaged when I signed up for the Marketplace so there was NO WAY possible to anticipate what our combined income would be since I didn’t know they would combine. Is that accurate? I’m responsible for paying it all back when we didn’t have combined income (or bills) for 9.5 months out of the 12? Thanks in advance for your help!!!

Louise Norris
10 months ago
Reply to  Aarika

Aarika,
It’s possible that you might be able to repay less, although we strongly recommend that you consult with a tax adviser who can help you with the details of your specific situation. But the IRS publication about the premium tax credit does have instructions on how to use an alternate calculation for situations like yours (ie, receiving premium tax credits as a single person, but getting married mid-year and filing a join tax return): https://www.irs.gov/pub/irs-pdf/p974.pdf (see page 37, and then pages 43-45)

Oren
Oren
10 months ago

I AM $401 over the the poverty level on agi and owe $15,000 is there any tolerance or suggestion?

Louise Norris
Louise Norris
10 months ago
Reply to  Oren

We strongly recommend that you reach out to a tax adviser to see if there’s anything that can be done to get your ACA-specific MAGI into the subsidy-eligible range. But one solution that might work is IRA contributions. If you haven’t yet contributed the maximum allowed amount to a traditional IRA, you still have until April 15 to make those contributions, and they do lower your MAGI under ACA rules. HSA contributions can also be made up until April 15 and they also lower the ACA-specific MAGI, although they can only be made if you had an HSA-qualified health plan last year. Here’s more about how all of this works: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

Guest 22
Guest 22
9 months ago
Reply to  Louise Norris

I believe that the IRS has confirmed that July 15 will also be the new deadline for making IRA contributions for the 2019 tax year.

Louise Norris
Louise Norris
9 months ago
Reply to  Guest 22

Yes, they have. They are also allowing HSA contributions for 2019 to be made up until July 15 this year: https://www.healthinsurance.org/glossary/health-savings-account/#contributions

Guest 1
Guest 1
10 months ago

I had the UHC Essential Community plan for 7 months while I was a substitute teacher and my days working were inconsistent. During my time on the plan I exceeded the amount of money by $4,000 to qualify. I canceled the plan and I have since gotten a full time job which made my year end salay $57,000. What is the subsidy for the Essential Community Plan and will I owe all of it back?

Louise Norris
Louise Norris
10 months ago
Reply to  Guest 1

The Essential Plan in New York isn’t the same thing as a subsidized qualified health plan. They don’t send out a 1095-A for people enrolled in the Essential Plan, as there’s no premium tax credit to reconcile (in this regard, it functions more like Medicaid). So you shouldn’t have to pay back anything if your coverage during the year was only through the Essential Plan and then your employer’s plan (ie, assuming you didn’t switch to a subsidized qualified health plan in between). Here’s more from New York State of Health: https://info.nystateofhealth.ny.gov/sites/default/files/Tax%20Credits%2C%201095A%2C%201095B%20Webinar%20Slides.pdf

GTS
GTS
10 months ago

21 yr old, not a dependent of anyone, worked all of 2018 & had ACA premium subsidy for 2018. For 2019 ACA, same job & utilized 2018’s income to estimate 2019 income, which again qualified me for ACA premium subsidy.
Took a couple months off work in early 2019 to study for test #1 (of 4) of GED — had savings to pay expenses while off work. Initially planned to go back to work after first test. After first test, decided to focus fulltime on studying for test #2, then go back to work. Rinse & repeat for tests 3 & 4. Ended up taking better part of 2019 to complete all 4 exams and did not return to work as initially planned — had enough in savings to get through okay. (Did return to work early 2020 tho!)
Did not notify healthcare.gov of income change during 2019 because intent throughout year was to retun to work at some point during 2019.
Total income for 2019 under $700, with Zero tax due. Prepared Form 8962 (both manually & via online tax program) and shows refund due me $292. This seems wrong! I understand the subsidy doesn’t have to be repaid, as explained in this article, but it seems incorrect for me to get a refund(???), especially of that amount. Looked through Pub. 974 for help, but not finding an example similar to my circumstance.

Louise Norris
Louise Norris
10 months ago
Reply to  GTS

Congratulations on successfully completing all of your exams, and on your new job!
The ACA’s premium tax credit is refundable (ie, they’ll send you whatever excess amount you’re owed, even if you don’t have to pay taxes), but with an income of $700, your premium tax credit amount would have been reduced to $0 during the tax filing process. As you noted, they won’t make you pay back the tax credit that was paid on your behalf, but there shouldn’t be any excess amount stemming from your health insurance.
My area of expertise is health insurance, not taxes, so take this with a grain of salt. But I wonder if perhaps your refund comes from something related to education expenses? It seems like the American Opportunity Credit (which is partially refundable) might be a possibility, depending on what your education expenses were in 2019? https://turbotax.intuit.com/tax-tips/college-and-education/take-advantage-of-two-education-tax-credits/L7Vi7FQxd

Ryan
Ryan
10 months ago

Good afternoon. When filing my 2020 taxes I discovered that I owed all of my premiums roughly $9100. I normally do fall into the 400% poverty tax bracket but after loosing my job in 2018 and my wife not working after giving birth to our son, we had no choice in 2019 but to take an early 401k withdrawal of $23k to pay our student loans, vehicle loans, mortgage, and all other living expenses. Now bc of this, our household income was about $18,665 higher than I originally placed on my application. I have no idea how I’m able to pay these premiums back. Any help or advice is greatly welcomed.

Christine
Christine
10 months ago

Does the stimulus check have to be included as a change to your yearly income?

Louise Norris
Louise Norris
10 months ago
Reply to  Christine

No, the one-time stimulus check is tax-free and does not get added to your income for determining your subsidy or Medicaid eligibility. But unemployment benefits, including the extra $600/week provided by the CARES Act, are counted as income when premium subsidy amounts are calculated (note that the $600/week is NOT counted for Medicaid eligibility, however). Here’s more about all of this: https://healthlaw.org/congress-stimulus-package-and-its-impact-on-magi/

Diane
Diane
10 months ago

I was on the Healthcare plan for the last 3 years but now I have cancel it because I am eligible for Medicare. I cancel in October 2019. My question is can I make more income now since I am off of the healthcare plan in 2020 and future years. I like to take money out of my 401K if possible.

Josh Schultz
Josh Schultz
10 months ago
Reply to  Diane

It sounds like your marketplace coverage ended last year, so this year’s income won’t impact what you get in terms of subsidies through the marketplace. It will however have an impact what you pay for Medicare Part B and D in future years. The income limits and information about income-related premiums are available here: https://www.medicareresources.org/medicare-eligibility-and-enrollment/what-is-the-income-related-monthly-adjusted-amount-irmaa/

Josh Schultz
Josh Schultz
10 months ago
Reply to  Diane

Because your marketplace coverage ended last year, changes impacting your income this year won’t put you at risk of repaying your marketplace subsidy. Income changes will, however, impact what you pay in future years for Part B and D coverage under Medicare. More information on that is here: https://www.medicareresources.org/medicare-eligibility-and-enrollment/what-is-the-income-related-monthly-adjusted-amount-irmaa/

Lea
Lea
10 months ago

Hi,
I went over the 400% poverty line because I had a change in employment. Is it too late to try to contribute to my 401K so I lower my MAGI? I still haven’t done my 2019 taxes yet.
Thanks.

Louise Norris
10 months ago
Reply to  Lea

Lea,
You will definitely want to reach out to a certified tax adviser for help. But my understanding is that 401(k) contributions have to be made by the end of the tax year (so Dec 31, 2019, for 2019 contributions). The IRS did extend the deadlines for contributions to HSAs and IRAs, however: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers So if you had HSA-eligible health coverage in 2019, or if you haven’t yet contributed to a traditional IRA for 2019, those are options that might work, and they do both reduce your MAGI for subsidy-eligibility determinations: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/
Note that there are income limits that are used to determine how much of your traditional IRA contribution can be deducted (and thus lower your ACA-specific MAGI) if you also have a retirement plan at work: https://www.irs.gov/retirement-plans/2019-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work

Kathy
Kathy
10 months ago

My son, 29, has BCBS through ACA Marketplace. He is getting a small subsidy but recently lost his job so has no income now. He is afraid to report it for fears of being dropped from his insurance. I told him his premium should go down but I didn’t think they would drop him. Would they? He has money saved to pay the premium, but not alot for anything else if he doesn’t get it lowered.

Louise Norris
Louise Norris
10 months ago
Reply to  Kathy

Kathy,
There are a few factors to take into consideration here:
1) His insurance plan cannot drop him due to a change in income. But his subsidy would end if the income change puts his projected income for the year below the poverty level (or below 138% of the poverty level if he’s in a state that has expanded Medicaid, which is the majority of the states).
2) If his total income for the year (including what he earned earlier this year) still puts him in the subsidy-eligible range (ie, at least the poverty level in a state that has expanded Medicaid, or at least 139% of the poverty level in a state that hasn’t), his subsidy amount should increase when he reports the income change to the exchange. This would make his after-subsidy premium lower and help to keep his coverage affordable while he’s out of work. Here’s a page where you can see which states have and haven’t expanded Medicaid: https://www.healthinsurance.org/medicaid/
3) If he’s in a state that has expanded Medicaid and he reports an income change that puts him at or below 138% of the poverty level for the year, he’ll be able to switch to Medicaid. And although premium subsidy eligibility is always based on annual income, Medicaid eligibility can also be determined based on monthly income. So it can serve as a safety net for people who experience a sudden drop in income, even if it’s just for a few months and even if they had significant income earlier in the year.
4) Regardless of whether your son reports his income to the exchange, he’ll have to reconcile his premium subsidy with the IRS next spring when he files his 2020 tax return. At that point, they’ll look at the total amount he earned in 2020 and compare it with the total amount of premium subsidy that was paid on his behalf. That’s where the details of the above article come into play, with the reconciliation process.
5) People whose income ends up being Medicaid-eligible (or below the poverty level in a state that didn’t expand Medicaid) are not required to pay back their premium subsidy on their tax return, although the exchange will make them prove their income for the following year if they continue to attest that they’re subsidy-eligible. This is explained in more detail here: https://www.healthinsurance.org/faqs/if-my-income-is-less-than-expected-this-year-i-might-be-eligible-for-medicaid-what-can-i-do-during-open-enrollment-to-cover-my-bases/
6) If he’s eligible for unemployment benefits, the amount that he receives will be counted as income for determining premium subsidy eligibility. This includes the extra $600/week that the federal government is funding via the CARES Act. But that extra $600/week does not count as income for Medicaid eligibility. This sounds complicated, but the end result is that the extra $600/week won’t hurt a person’s chances of getting Medicaid, but it will also help people to keep their income in the subsidy-eligible range for a plan purchased in the exchange (since subsidies aren’t available for people with very low incomes).
I hope that helps!

Louise Lipert
Louise Lipert
9 months ago

After completing my 2019 Taxes, it showed that I have to re-pay the tax premium credit I received, as my income went above 400% (by 1%)! I sent this information onto the marketplace and informed them I will be choosing a new plan. I included my 2019 1040 and Form 8962.
Then yesterday, I got a call from the marketplace saying my tax credit has been approved for 2020. I called back to confirm and they said it is true. I don’t understand how this can be – for 2019, I need to re-pay the credit and in 2020 with the same income , I am confirmed to get a tax premium. What do you think is going on? Thanks so much.

Louise Norris
Louise Norris
8 months ago
Reply to  Louise Lipert

Hi Louise,
Just in case it’s an option for you, I wanted to make sure you know that contributions to a pre-tax retirement account (and/or an HSA, if your health plan was HSA-qualified) will reduce your ACA-specific MAGI and might make it so you don’t have to repay the subsidy that was paid on your behalf in 2019 (and you still have until July 15 to make those contributions, since the tax deadline was extended this year): https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/
But even if there’s nothing you can do to get your ACA-specific MAGI from 2019 into the subsidy-eligible range, it’s possible that you’re subsidy-eligible in 2020 with the same income. Subsidy eligibility is based on the prior year’s poverty level, which increases each year. So the income limit for subsidy eligibility for a single person in 2019 was $48,560, but it’s $49,960 in 2020 (if you have other people in your household, these numbers would be higher). So if your income was just a tiny bit above the cutoff in 2019, it would be within the subsidy-eligible range in 2020.

John Smith
John Smith
8 months ago

My wife and I lost our jobs in May 2020. We have no insurance as of 6/1/20. For family of 4, the income limit is $41,200 in Connecticut. We had insurance from my job until May 31, 2020 and made around $85000 ( combined income). Now, we are applying for a state insurance as of 7/1/2020 and we have no jobs. When they calculate our income, are they going to use the income after 7/1/2020? Our state insurance will start on 7/1/2020

Louise Norris
Louise Norris
8 months ago
Reply to  John Smith

John,
If you’re applying for Medicaid, they can calculate your eligibility based on your current monthly income, even if it’s $0. Connecticut expanded Medicaid under the ACA, which means coverage for adults in a family of four would be available with an annual income of up to about $36,000 this year (kids are eligible even with a higher household income).
But if you’re applying for a private plan in the marketplace (Access Health CT), your subsidy eligibility is going to be based on your total household income for the year (it’s an ACA-specific calculation of MAGI, described here: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ ). That means it will include whatever income you and your wife earned prior to the end of May, as well as any unemployment benefits you may be receiving now, plus any income you might earn later in the year… it could be a tricky number to estimate at this point. Once the year is over and you file your 2020 tax return, the IRS will adjust the premium subsidy (premium tax credit) that was paid on your behalf, based on what your income actually ends up at for the year.

Maryellen
Maryellen
8 months ago

A friend in Texas I helped get signed up for the ACA. I’m an independent woodworker. I evidently didn’t provide the right proof of income to the government and they dropped my subsidy. I had given my insurance company permission to debit my account and $800 suddenly disappeared! I can’t pay my mortgage without that money. I’m going to contact the ACA office and my insurance, but I’d like advice about the best way to get my money back. I know it can be a difficult and lengthy process to deal with the government and insurance company, but can’t wait months to get the money back.

Louise Norris
Louise Norris
8 months ago
Reply to  Maryellen

I’m sorry you’re in this situation. We have some general information here about resolving issues with the marketplace and your insurance plan: https://www.healthinsurance.org/faqs/who-can-help-if-i-have-a-problem-with-my-aca-compliant-coverage-or-exchange-enrollment/ You’ll probably want to start with the exchange (Texas uses HealthCare.gov; the call center number is 1-800-318-2596). You can ask them to escalate the situation if they don’t seem able to help you quickly from the beginning. Make sure you keep careful notes about who helps you, an applicable incident number, etc. You may or may not have to contact your insurance company as well.

Mike
Mike
8 months ago

Since Louise has graciously continued to answer questions on this post, I’ll see if she can help with mine. My 22-year old Daughter in NC obtained a subsidized Silver plan for 2020 based on her plan to graduate from college in May and obtain a job as a public school teacher by August . For income verification, she provided the requested letter stating that she would be graduating and then working the last five months of the year with a projected income of $14,600 over that time. She was not going to be our tax dependent this year and we live in England so cannot cover her under a family plan. Unfortunately, she did not graudate on time and will only have about $2,000 of babysitting and tutoring income for the year. I assume this means she’ll no longer be qualified for her Silver plan through the exchange and since NC does not have expanded Medicare, I don’t think she can get coverage from that either. I’m scared to report the expected change in income. What should we expect as far as keeping coverage for the 2nd half of the year or repayment of the subsidy if the policy is cancelled? Any guidance would be greatly appreciated as this is a very difficult situation with her in NC and us no longer in the US.

Louise Norris
Louise Norris
8 months ago
Reply to  Mike

Mike,
This is a difficult situation, for sure. It’s true that NC has not expanded Medicaid, which means there is no financial assistance available for an adult earning less than the poverty level, if they don’t qualify under one of Medicaid’s other eligibility categories (disabled, pregnant, etc.).
When her premium subsidy is reconciled next spring (on her 2020 tax return), the IRS will not, as a general rule, make her repay the subsidy if her actual income ends up being below the poverty level. I explain that in more detail here: https://www.healthinsurance.org/faqs/if-my-income-is-less-than-expected-this-year-i-might-be-eligible-for-medicaid-what-can-i-do-during-open-enrollment-to-cover-my-bases/
But Publication 974 (see the bottom of page 6: https://www.irs.gov/pub/irs-pdf/p974.pdf ) explains that the protection against having to pay back a subsidy if you’re income ends up under the poverty level does not apply if the applicant exhibited “intentional or reckless disregard for the facts” when supplying income information to the exchange, or if the “lack of effort to provide accurate information is substantially different from what a reasonable person would do under the circumstances.” In this case, your daughter provided accurate information when she first enrolled, based on her income expectations at that point. But enrollees are also supposed to provide updated information to the exchange if their circumstances change… I’m not sure, however, whether enrollees with income changes would be held to the same standards in the eyes of the IRS.
Either way, her policy should not be canceled. If she reports the income change, her subsidy will be eliminated and she’ll need to pay full price for her plan for the rest of the year (the IRS should not, in that case, make her pay back the subsidy that was paid on her behalf earlier in the year, since that was certainly based on a good-faith estimate, despite the fact that she’ll end the year with income that’s not subsidy-eligible). She would also lose her cost-sharing reductions, which means her silver plan would revert to being a regular silver plan, without the enhanced benefits that are provided to people with income between 100 and 250% of the poverty level. But the exchange should also offer her an opportunity to switch to a lower-cost bronze plan if and when she reports her income change.
I assume your daughter will still be in school for the fall semester, graduating at the end of the year? If so, can she enroll in a student health plan offered by her university? If she reports her income change to the exchange and loses her subsidy, the plan offered by her university might be a more affordable option for the remainder of the year. Assuming she’s going to start teaching in 2021, she would then be able to re-enroll in a plan through the exchange during open enrollment this fall (November 1 – December 15), for coverage that would start in January and a subsidy based on the income she expects to earn in 2021.
As always, we recommend that people reach out to a professional tax adviser in situations like this, to see if they might have any suggestions that go beyond health insurance.

Mike
Mike
8 months ago
Reply to  Louise Norris

Thanks, Louise. I did read through the article you linked and agree that the goverment does not reclaim the premium subsidy for those below 100% of the poverty level. Several other sources confirmed this, making it difficult to see the incentive to report the income reduction unless not doing so will interefere with next year’s enrollment process. (Not that any advisor would ever recommend that path.) We’re also investigating the university insurance option–good suggestion. Thank you again for taking the time to provide such a detailed reply.

Ann
Ann
8 months ago

I anticipated earning more than I indicated on my application. I was put into a Silver plan. Currently, my only income is SS Retirement and the yearly total would most likely put me in the Medicaid range. I have a few questions, 1) Would I have to pay any of my subsidy back; 2) Will I immediately be terminated upon filing my Tax Return; 3) Will I be eligible for Medicaid; and 4) Do you know if it is accurate that if you are on Medicaid, and subsequently die, Medicaid will put a lien on your Estate dollar for dollar for the amount they paid for your medical expenses. (Asking, as I have a medical condition and I own a home and am concerned.) I live in New Jersey. Thank you~

Louise Norris
Louise Norris
8 months ago
Reply to  Ann

Ann,
We recommend that you seek advice from a tax adviser who can help with the details of your specific situation. But here’s some general information that might help:
1) If you’re enrolled in a marketplace plan with premium subsidies and you end the year with income that would have made you Medicaid-eligible, the IRS will generally not make you repay the subsidy that was paid on your behalf. That’s explained in more detail here: https://www.healthinsurance.org/faqs/if-my-income-is-less-than-expected-this-year-i-might-be-eligible-for-medicaid-what-can-i-do-during-open-enrollment-to-cover-my-bases/
2) No, your health plan would not be terminated when you file your tax return, and your premium subsidy should not change either. The tax return you’re filing this year is for 2019, and the premium subsidy you’re receiving is based on your projected 2020 income. You may find, however, that the exchange will not re-enroll you for 2021 with a premium subsidy if your most recent tax return (for 2019) reflects a Medicaid-eligible income. In that case, they will likely make you show proof that your income has since increased in order to continue your subsidy.
3) New Jersey has expanded Medicaid, so if your income drops into the Medicaid-eligible level, you can switch to Medicaid at that point.
4) Yes, New Jersey has an extensive Medicaid estate recovery program that goes beyond the minimum federal requirements. New Jersey recaptures (from the estate of a deceased resident who had Medicaid coverage) the money that was spent by Medicaid on any care for a person who was 55 or older: https://www.state.nj.us/humanservices/dmahs/clients/The_NJ_Medicaid_Program_and_Estate_Recovery_What_You_Should_Know.pdf

Jana Jesmer
Jana Jesmer
8 months ago

I understand that since I overestimated my income, I must repay the subsidies allowed. Do I have to pay 100% back?

Louise Norris
Louise Norris
8 months ago
Reply to  Jana Jesmer

It depends on your income. If you earned more than 400% of the poverty level, you’ll have to pay back the entire premium subsidy that was paid on your behalf. But if your income was less than 400% of the poverty level, the amount you have to pay back is capped, and the caps vary depending on your income. The details are shown in Table 5 of the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf (Table 5 is on page 16 of those instructions).
So for example, if you’re a single person and you earned $30,000 last year, the amount of excess premium subsidy you’d have to repay would be capped at $800, since that income would put you between 200% and 300% of the poverty level.

Rob
Rob
7 months ago

Hi, My aunt received inheritance this past year reported to her on a 1099-R. This was a sizeable amount and put her over the 400% poverty limit so she now must repay the entire premium tax credit of over $10,000. Is there any breaks or anything that can be done because it was an inheritance?

Louise Norris
Louise Norris
7 months ago
Reply to  Rob

It sounds like the inheritance was from a pre-tax retirement plan, since it was reported on a 1099-R and the IRS is saying that she has to repay her premium tax credit (in other words, they’re saying it was taxable income). Inheritances generally aren’t taxable, but that’s not the case for inherited retirement accounts in which the money was originally contributed pre-tax. Here’s more about that: https://www.alllaw.com/articles/nolo/wills-trusts/must-pay-income-tax-inherited-money.html
Unfortunately, there’s no exception to the 400% of FPL cap on premium tax credit eligibility. If her taxable income goes over that limit, all of the premium tax credit has to be repaid. There are ways to reduce ACA-specific MAGI, including contributions to a pre-tax retirement plan and contributions to an HSA (if the person had HSA-qualified health coverage during the year), and both of those contributions can be made up until the tax filing deadline: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/ (but depending on the size of the inheritance, they might not move the needle very much).

Joe
Joe
7 months ago

I had been receiving $1700/month tax credit through the ACA. I got a better job with benefits and cancelled my ACA on July 14th. I will now exceed the 400% limit. Do you know if I will need to pay back the full amount for ACA coverage in July, or if it will be prorated? Thanks for your help.

Louise Norris
Louise Norris
7 months ago
Reply to  Joe

Unfortunately, if your income exceeds 400% of the poverty level this year, you’re going to have to pay back the entire premium tax credit that was paid on your behalf from January through July. The rule that prohibits premium tax credits for anyone with income above 400% of the poverty level applies regardless of whether the income is earned throughout the year or all in one chunk at the end of the year or somewhere in between. So you’ll want to plan ahead for this, as you might be facing a significant tax bill next spring.
“Income” is based on an ACA-specific calculation of MAGI, which is explained here: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/
And there are ways to reduce your ACA-specific MAGI, including contributions to pre-tax retirement accounts and/or an HSA (but contributions to an HSA are only allowed if you’ve enrolled in an HSA-qualified plan through your employer). Here’s more info that might be helpful: https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

Joe
Joe
7 months ago
Reply to  Louise Norris

Thanks for your reply. I might not have been very clear with my question: I do understand that I will need to pay back the premium through June, but I am wondering if July will be prorated as I canceled on the 14th. I appreciate your response.

Louise Norris
Louise Norris
7 months ago
Reply to  Joe

Thanks for the clarification. As a general rule, pro-rated refunds are not issued and coverage would be terminated July 31 in that case. But we have heard of some variation on this. You’ll need to look at the termination of coverage letter that you receive from your insurer and the marketplace to be sure.

Kelly Doyle
Kelly Doyle
7 months ago

We actually earned a small enough income to qualify. Problem is, in July my husband was informed by a previous employer that he could cash out some stock. We did this and our income then showed too high, so now they say we have to repay $28,000!!! I had called and questioned the rep at Marketplace and in July and was told not to worry about it, that there was a cap of like $1200. I most certainly would have cancelled my insurance in July 2019 and saved over $12,000 owing to IRS had I been properly informed. Guess I should have looked it up on the internet instead of trusting Marketplace rep to know what she was talking about. I am really sad to owe all of this money on top of what we owe as taxes on the stock we cashed out. I guess I’ll call the IRS and see if they at least won’t charge me interest on that $28,000.

Louise Norris
Louise Norris
7 months ago
Reply to  Kelly Doyle

I’m sorry you’re in this situation! You’ve probably figured it out by now, but the cap the rep was talking about only applies for households that end up with an income that doesn’t exceed 400% of the poverty level. If you go over that amount, there’s no cap. So the cap would apply for a household that, for example, projected an income of 300% of the poverty level and then ended up with an income of 380% of the poverty level. For a married filing jointly household, the excess subsidy repayment would have been capped at $2,650 (see page 16, here: https://www.irs.gov/pub/irs-pdf/i8962.pdf ). But unfortunately, that cap doesn’t apply if your income went over 400% of the poverty level, and it sounds like that’s what happened for your family.
For what it’s worth, Joe Biden’s health care reform platform includes a provision that would eliminate the subsidy cliff, meaning that subsidies would no longer end at 400% of the poverty level: https://joebiden.com/healthcare/ To become a reality, that would have to be approved by Congress as well, but it’s very much a part of Democratic lawmakers’ proposals too.

Sky
Sky
7 months ago

Hi Louise,
Thanks for your article. I wish to be prepared for my 2020 income tax filing next year. I am new to collecting the unemployment compensation.
Per Covered California Health Insurance website, the extra $600 taxable income per week PUC is Not
counted for determining one’s eligibility for Medi-Cal in California. If so,
Will there be any subsidies expected to be paid back in either scenarios? What tax forms should I be using (a 2019 sample forms is good enough for now)?
Scenario 1. My total income for the year (2020) ExceedS 400% of the poverty level,
Scenario 2. My total income for the year (2020) does Not exceed 400% of the poverty level,
Reference Source:
https://www.coveredca.com/CARES-Act/
“Is the extra $600 per week Pandemic Unemployment Compensation (PUC) considered taxable income for purposes of determining my eligibility for Medi-Cal and CHIP?
No. They are excluded from your income for purposes of determining your eligibility for MediCal and CHIP (C-CHIP and MCAP). However, traditional federal and state unemployment benefits would still be considered income for Medi-Cal and CHIP purposes.”

Louise Norris
Louise Norris
7 months ago
Reply to  Sky

Sky,
We always recommend that people contact a tax professional if they have questions about their specific tax situation. But as general background information, the extra $600/week in federal unemployment benefits IS counted when determining eligibility for premium subsidies in the marketplace, but IS NOT counted when determining eligibility for Medicaid (Medi-Cal in California). Here’s more about this: https://healthlaw.org/congress-stimulus-package-and-its-impact-on-magi/
If a person is enrolled in a private qualified health plan through the marketplace and receiving premium subsidies and then ends up with an income above 400% of the poverty level, they will have to pay back the entire subsidy amount. But there are no subsidies provided for Medi-Cal; people who are enrolled in Medicaid do not have to reconcile anything regarding their health insurance on their tax returns.
For reference, here’s how modified adjusted gross income is determined under the ACA: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ (for most purposes, the same process is used for both Medicaid and premium subsidy eligibility, but the $600/week in federal unemployment benefits is an example of where they differ)

Sky
Sky
7 months ago
Reply to  Louise Norris

Louise, Thank you so much for the clear and very helpful response. I’ve learned a lot from you on the subject.
Best,
Sky

Anita
Anita
7 months ago

I receive a monthly tax credit for marketplace insurance for me, my husband and son who just turned 20, he is the oldest of our children. We are a household of 6.
He did not attend college in 2020 and lives with us and we provide more than half of his living expenses. He files his own tax return and will likely go over $12,000 with the unemployment and the federal unemployment($600 per week) due to the pandemic. I was told I can not claim him as a dependent on our taxes. Will I have to pay back all of the subsidy for him or will everything work out. We gross about $50,000 a year.

Louise Norris
Louise Norris
7 months ago
Reply to  Anita

Anita,
You should speak with a tax professional for specific advice pertaining to your family’s situation. But the instructions for Form 8962 (use to reconciled premium tax credits) might be helpful in terms of understanding how this is handled: https://www.irs.gov/pub/irs-pdf/i8962.pdf Since you can’t claim your son as a tax dependent, you’ll be considered two separate tax households when you each file your returns next spring. The IRS addresses this on page 18 of the instructions for Form 8962. Basically, the premium tax credit gets allocated between the two tax returns, and the filers can choose how to allocate it. So it’s possible for 100% of it (whatever the family ends up being eligible for once final income is known) to be allocated to your tax return and 0% to your son’s, or some other allocation that you agree upon. If your son’s total income combined with the rest of your household’s total income is more than you initially projected when you enrolled, you may end up having to pay back some of the premium subsidy that was paid to your insurer this year, but you’re still well within the subsidy eligibility level for your household size.

Anita
Anita
7 months ago
Reply to  Louise Norris

Thanks, so for 2021, I should just create his own marketplace account and enroll him in his own healthcare or do it the same way as 2020? Also, it states your child must be under the age of 19 at the end of the year. Does that mean 19 ? My second son is turning 18 this month and I will be fine with him as a defendant for 2020 , but not sure for 2021.

Anita
Anita
7 months ago
Reply to  Louise Norris

Oh, one more question. So if My son gets his own marketplace account in 2021 and qualifies for monthly tax credit and for some reason does not earn the required amount annually which I think is 12,500 does he have to payback the entire subsidy or just based on under the 400% poverty chart for single?
Thanks so much.

Anita
Anita
6 months ago

Thanks, so for 2021, I should just create his own marketplace account and enroll him in his own healthcare or do it the same way as 2020? Also, it states your child must be under the age of 19 at the end of the year. Does that mean 19 ? My second son is turning 18 this month and I will be fine with him as a defendant for 2020 , but not sure for 2021. Oh, one more question. So if My son gets his own marketplace account in 2021 and qualifies for monthly tax credit and for some reason does not earn the required amount annually which I think is 12,500 does he have to payback the entire subsidy or just based on under the 400% poverty chart for single?
Thanks so much.

Ju ju
Ju ju
6 months ago

I’m ending Market place healthcare coverage to enroll in a job based plan. What happens if I end up making more than my estimated salary for the year after I have ended
the marketplace plan?

Louise Norris
Louise Norris
6 months ago
Reply to  Ju ju

If you end up earning more than you projected for 2020, you’ll have to pay back some or all of the premium tax credit that was paid on your behalf. If your total household income for the year (including whatever you earn from your new job) doesn’t exceed 400% of the poverty level, there are caps on how much of the premium tax credit you’d need to repay (see Table 5 in the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf )
But if your income ends up going over 400% of the poverty level, you’ll have to repay all the premium tax credit that was paid on your behalf this year.

Chris Koenig
Chris Koenig
6 months ago

I reported when I signed up for a marketplace plan that i would make $22,000 in 2020. Turns out I will be at around $27,500 because of unemployment $600 benefit payments. Calculator shows that at 231.5% of federal poverty level. what would you assume I will owe back? i am single and only one in household with just that income nothing else to claim. thanks if you have any info for me!

Louise Norris
Louise Norris
6 months ago
Reply to  Chris Koenig

Great question! The poverty level (in the continental US) for a single person in 2019 was $12,490, and that’s the number that’s used to determine subsidy eligibility for 2020 coverage. The amount you projected ($22k) put you at 176% of the poverty level, whereas the amount you’re going to end up earning ($27,500) puts you at 220% of the poverty level.
This FAQ explains how the math works in terms of how much of your income you’re expected to pay for the benchmark plan at a particular income level: https://www.healthinsurance.org/faqs/is-the-irs-saying-ill-have-to-pay-more-for-my-health-insurance-next-year/
The short story is that your expected contribution at $22k would have been 5.35% of your income, or a total of $1,177 in premiums for the year (this is for the benchmark plan; you pay less if you pick a less expensive plan and more if you pick a more expensive plan, but the subsidy amount stays the same).
But at $27,500, your expected contribution is 7.21% of your income, or $1,983 in total premiums for the benchmark plan. That’s a difference of $806 in premium subsidies (about $67/month) that you’re receiving based on the lower income but that you wouldn’t get based on the higher income.
The current cap on excess subsidy repayment for a single filer earning 200-300% of the poverty level is $800. It might be higher next year, but it looks like you’ll have to repay all or nearly all of the excess premium subsidy, which is going to come out to about $800 anyway.
Hope that’s helpful!

Randy
Randy
5 months ago

Hi – I am in the rare situation where I paid the full unsubsidized premium for my exchange program (wife and 1 child). I am self employed and my income typically comes in the form of lump sum payments toward the end of the year. In 2019, I expected to received a large payment by December that ultimately was pushed into January of 2020 (due to a legal dispute with the payer). As a result, my income for 2019 fell below the poverty level – something I could not have predicted until the very end of the year. Now I am being told the ~25K I paid in full premiums is completely un-refundable because I fell below the poverty line and should have been on Medicaid the whole year, but how would I have every known that. Is this correct – am I ineligible for any subsidy because I tried to be responsible and pay the full premium upfront to avoid paying back a subsidy at the end of the year?

Louise Norris
Louise Norris
5 months ago
Reply to  Randy

Unfortunately, yes. I wish I had a better answer for you, and I’d advise you to consult with a tax adviser to see if there’s any way that your income for 2019 can be adjusted. But if not, you would not be eligible for the premium tax credit. This is explained in the instructions for Form 8962: https://www.irs.gov/pub/irs-pdf/i8962.pdf (on page 2 and page 8). They would allow a premium tax credit if the marketplace had estimated your projected income to be at least 100% of the poverty level and provided you with APTC, even if your income then fell below the poverty level. But you cannot go back and claim it after the fact in that situation.

Randy
Randy
5 months ago
Reply to  Louise Norris

Thanks for the reply Louise, may be able to boost earned income for year to reach that level – but there is one other wrinkle. I have a NOL from previous year loss, my thought was to qualify for APTC my earned income for the year just has to be over the poverty level – but does the NOL offset MAGI for the purposes of APTC qualification as well – meaning do I have to earn back the entire NOL plus the min poverty level income to qualify. Thanks in advance again for time.

Penny Edward's
Penny Edward's
5 months ago

For 2020, my brother and his wife (Family of 2) received the ACA tax credit/insurance subsidy with a projected income of ~$49000. He is the sole income earner but she started receiving SSI disability in Jan. 2020. His wife passed away in July 2020. How will the %federal poverty level be calculated when we do his 2020 taxes? If the limit is based on a family of 2, I think he will be less than 400% FPL but if it is based on a single person, he will be over and have to pay back. How do we figure this out? Will the family of 2 carry through the entire year even though his wife died in July? Thank for the help.

Louise Norris
Louise Norris
5 months ago
Reply to  Penny Edward's

I’m very sorry to hear that your sister-in-law passed away. In a situation like this, your brother will still file his tax return as married filing jointly for 2020 (this is true regardless of when during the year a spouse passed away), so he’ll have a tax household of two. But his Form 8962 (where the premium tax credit is reconciled) will show different amounts for the total premiums and total premium tax credit for January – July versus August – December. These numbers will be reflected on the 1095-A that he’ll receive from the marketplace early next year, assuming he let them know about his wife’s death and they removed her from the policy as of August.

Mark
Mark
5 months ago

There is no such thing as affordable insurance anymore. The garbage insurance these days costs $6000 deductible for people in the ACA plan and for people that make more than the 400% of poverty level the insurance costs approx. $700 per month with a $6000 deductible. Before the ACA I paid approx. $430 per month for great insurance now the same plan would cost me $2000 per month.
If people were to poor to buy insurance how could they afford to buy cheap insurance with a $6000 deductible and be able to use it?

Louise Norris
Louise Norris
5 months ago
Reply to  Mark

It’s true that the ACA’s subsidies (both premium subsidies and cost-sharing reductions) are inadequate for many enrollees. And the lack of premium subsidies for people above 400% of the poverty level creates a subsidy cliff that can result in coverage being entirely unaffordable for people a little above that cut-off.
The Democratic Party’s 2020 platform and the Biden/Harris proposal call for the removal of the 400% of income cap on subsidies, a switch to gold plans instead of silver plans for the benchmark (which would result in larger subsidies and more people able to afford plans with lower deductibles), and a smaller percentage of income that people would have to pay for their coverage before the subsidy kicks in.

Donald
Donald
5 months ago

I got a health plan through healthcare.gov and received a subsidy of $1143.00 a month but underestimated my income and am way over the limit. Will I have to repay all those months at $1143.00 a month at the end of the year

Louise Norris
Louise Norris
4 months ago
Reply to  Donald

If your total income (ACA-specific MAGI, as defined here: https://www.healthinsurance.org/glossary/modified-adjusted-gross-income-magi/ ) ends up being more than 400% of the poverty level, you will have to repay the entire amount of the premium tax credit that you received for the year. If you were getting $1143 per month, that would mean repaying $13,716 when you file your taxes.
But if you just mean that your income ended up being higher than you projected, but not more than 400% of the poverty level, there are caps on how much you’d have to repay. They vary from $300 to $2,650, depending on your filing status and income (see Table 5, here: https://www.irs.gov/pub/irs-pdf/i8962.pdf ) Note that those caps do not apply if your income ends up being more than 400% of the poverty level.
Note also that 400% of the poverty level is based on the prior year’s poverty level numbers. So for 2020 coverage, that’s the 2019 poverty level numbers. So for a single person, your ACA-specific MAGI would have to be no more than $49,960 in 2020 in order to qualify for a premium tax credit (the amounts are higher for larger households).

erich
erich
4 months ago

If you are on medicaid, but late in the year, on one month only, you have capital gains of say $1M for one time only. Do you have to pay back medicaid? It seems for the tax credits (non medicaid), that is reconciled when you file your taxes. Is there a similar thing for medicaid? And if not, what’s to stop someone from showing no income until the very end of the year and repeat that process every year by timing their capital gains or investment income?

Louise Norris
Louise Norris
4 months ago
Reply to  erich

You are correct. For MAGI-based Medicaid eligibility (as opposed to other types of Medicaid programs with eligibility rules that include asset tests), a person could follow the strategy you’re describing. There is a rule to prevent this for lump-sum lottery and gambling winnings: https://www.medicaid.gov/federal-policy-guidance/downloads/sho19003.pdf But there is not a similar rule for capital gains.

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