If you received too small a subsidy because you overestimated your income, that amount will be added to your tax refund — if you’re receiving one — or it will reduce the amount of tax that you owe.
Ex: "I just graduated college with a teaching degree and assume that I will have a job by this September. But what happens if I don't get a job and my income is too small to qualify for health insurance?"
If you overestimate your income AND you purchase your health insurance on the federal exchange (or state marketplace, depending on where you live), then you will receive all of your qualify subsidy as a tax credit when you file taxes at the end of the year.
If you decide to purchase insurance off the exchange/marketplace (through an employer or directly through an insurance company), then you are disqualified for a subsidy no matter what your income might be.
If you don't get a regular job and your income is too small, then you will likely get approved for Medicaid. In fact, if you apply for insurance on the exchange/marketplace they automatically check to see if you qualify for Medicaid.
If you overestimate your income, AND purchase it on the exchange, then you will receive extra in the form of a tax refund for the additional subsidy amount you would have qualified for.
This does not apply to cost-sharing reductions. For example, if you estimate your income to be a certain (lower) amount, I would receive a greater subsidy AND a lower deductible and out of pocket maximum. If you estimate your income to be a little higher just to be safe, and get a smaller subsidy and do not receive cost-sharing reductions you were entitled to, you will only receive an additional premium tax credit in the form of a tax refund (less any taxes you might owe) but that cost-sharing amounts are not re-calculated, repaid, or refunded.
So let's say I do overestimate my income. When it comes to tax time and I receive the extra, say $30/month in subsidies that i qualified for, will I also receive a refund of, say, the extra $1000 in "out of pocket" money since I would have had an out of pocket max that was much lower due to 'cost saving'? (Assuming that I met my out of pocket max for the year.)
Comments
4 comments
But what if I accidentally overestimate my income, and end up earning too little to qualify for premium tax credits? Will I have to pay back all that money to the insurance company?
similar question, my filing status has changed from single to head of household, the effect is: the obama care i have is silver plan which has the income requirement above 138% fpl. my agi fell off 138% FPL with a different filinng status, Do I need to payback all the credits? I don't find the place on IRS tax form to state this situation. 8962 did not test for 138% threshhold. Thanks.
I lost out on premium tax credits because I over estimated my income so I think your article needs to include some more details.
My situation was that I applied for CT marketplace insurance for the first time in 2018. I used prior year income which was a great earnings year. Income was >400% above the poverty line. Unfortunately, income went to zero in late 2017 & very low for 2018. My final 2018 AGI was a negative number. I still paid my insurance premiums with saved income and credit cards. I couldn't lose my insurance and thought I would be able to reconcile at tax return time. [Now I know, I should have called the marketplace and told them about my change of income but as I said, it was my first year doing this and I thought this was how it was done. I thought the reconciling came later.]
I had my taxes done by a professional and she said I made too little money for the PTC (premium tax credits). But, but ... that is the problem, I made too little money and I need the premium tax credits.
If you look through the form we use to reconcile, FORM 8962... Using 2018; Line 6 - See instructions if you entered less than 100% Income as a percentage of federal poverty line. (Remember mine was a negative number.)
Line 6 instructions: You do not meet the requirements if no APTC was paid for your coverage.
So, I didn't receive any Advanced Premium Tax Credits on my premium because my income was too high. I can't reconcile and get Advanced Premium Tax Credits because I didn't have any paid on our behalf. I could not get a tax credit as this article tells you. If your income is 400% above the poverty line for your household size. I would pre-review Form 8962 and its instructions. And if your income level changes tell the marketplace. Don’t be like me. 😭
After I read CM's comments above I was discouraged because I overpaid my Marketplace premiums last year. The first pass thru my tax forms there was no way that I could see to get the overpaid premiums refunded. However, the 1095-A form sent to me by the Marketplace did NOT have the correct monthly SLCSP amounts for my location and income. You can find out the correct amounts by googling the "marketplace healthcare tax tool", at which site you can have the government tell you the correct amounts for you, and enter the correct amounts on your tax forms, and (hopefully) get the tax credit for overpaid premiums that you deserve.
Please sign in to leave a comment.