What’s better take the Subsidy – APTC now or at tax time?
Advantages
Certainly the BIG advantage, is lower, more affordable premiums during the year. Plus, you might qualify for Enhanced Silver Benefits! Which lowers Co-Pays, Deductibles and the OOP Out of Pocket Maximum.
Disadvantages
If you took more creidt than what your tax return 1040 and 8962 show, you have to pay back the excess or a maximum amount.
You are mandated to report changes in expected MAGI income within 30 days.
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Check out the brochure from Covered CA on the take it now or later options.
Three Tax Considerations during Marketplace Open Enrollment
- Advance credit payments lower premiums – You can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit (APTC) or advance credit payments. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
- Possible SNAFU’s – Insurance Company asking for excess credits back… OC Register 7.27.2016
- A tax return may be required – If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
- Credit can be claimed at tax time – If you choose not to get advance credit payments, or get less than the full amount in advance, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.
Questions and Answers on IRS.gov/ca for information about the premium tax credit.
Related Pages in Tax Credit and FAQ Section
1095 A – Proof of Coverage from Covered CA – shows amount of tax credit you rec’d during the year, that was paid to the Insurance Company to reduce premiums.
CHCF What is the premium tax credit?
IRS.Gov FAQ’s on the Premium Tax Credit
Publication 5120 –Your Credit, Your Choice – Get it Now or Get it Later English | Spanish
Publication 5121 –Need help paying for health insurance premiums? English | Spanish
Publication 5152 –Report changes to the Marketplace as they happen English | Spanish
Historical
Here’s screen shots of Covered CA’s ONLINE Application of how you might want to take less or zero subsidy and just even out at tax time. Covered CA brochure on take it now or later Page 4. It may also help keep you out of Medi-Cal if your income is too low, see Federal Poverty Level –FPL chart or get a quote.
• Changing APTC – Recorded Webinar
• Changing APTC – PDF of Webinar Presentation
A side observation- it seems to be a really weird system to navigate for someone who is self-employed and has unstable income.
Actually, it’s weird for everyone, in the sense that no one really knows if their income will change suddenly for better or worse, and then they’ll have to resolve things retroactively with IRS.
That’s why they want you to report deviations of more than 10% of your estimated annual income within 30 days. See link for publication 5152 and job aid for reporting income above.
Haha thanks for your responses, I didn’t know about the monthly thing! Wow you are SO knowledgeable, it’s incredible. As a knowledgeable insurance agent, you’re basically a rocket scientist.
Okay I’ll get the documents together and send them to you.
Thank you so much,
Mindy
Hi Steve,
I just got my my taxes done this past week and found out that i had to do a repayment and ended up losing $357.00 on my federal tax return. I was wondering if you could make an adjustment on income so i don’t have to take as large of a discount so this doesnt happen in the future, thank you
~Tom
Do you want me to get you an access code so that you can go into your Covered CA account yourself and make income changes? – Instructions Mandate to report income changes monthly publication 5152.
What MAGI income amount do you want me to put down?
Play with the numbers in the sample quote or get one specific to you by clicking here. More income can also change your Enhanced Silver Benefit Enhanced-Silver.com
well i was hoping you could help me figure out what i need to change my income to so that i don’t lose any money next time around,
I also don’t mind if it changes my [enhanced-silver] benefits.
I just got a raise to $17.00 hr
$17/hour x 40 hours x 50 weeks = $34,000. Covered CA currently shows $22k Income, Silver 87 and $117/month subsidy on a $243 premium. I’ll make the change, as mandated to report monthly and this will bring you to no subsidy and Silver 70.