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.

tax.credit.two.ways.to.take.it
Covered CA Brochure – Subsidy NOW or Tax Time?
Flow Chart - Can you take the PTC Premium Tax Credit
Flow Chart – Can you take the PTC Premium Tax Credit Publication #974
  Advance Premium Tax Credit

 

FAQs / Ask Us a Question

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.

Take it later
Take it Later
premium.assistance.1
Premium Assistance

 

 

Slider to determine creditSlider to determine credit premium.assistance.2Monthly Advance or Credit? 2nd Step – Click to enlarge

 

 

Three Tax Considerations during Covered CA Open Enrollment

  1. 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.
    1. Possible SNAFU’s – Insurance Company asking for excess credits back… OC Register 7.27.2016
  2. 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.
  3. 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.

 

 

 

Premium and Tax Credit Calculators

Visit our quote engine then send us an email [email protected] with your expected Household Income for 2014 – MAGI .  We will send you the subsidy amount to subtract from the premium.

Kaiser Foundation Sample Tax Credit Calculation
and explanation

 

FAQs / Ask Us a Question

 

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

Publication 5152 –Report changes to the Marketplace as they happen  English | Spanish

What if you don’t tell Covered CA in advance that you want the credit, can you still get the deduction when you file taxes, as long as you got your coverage though Covered CA?

 

 

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

  • Changing APTC – Job Aid 2015

    Aid Codes dhcs.ca.gov/services/medi-cal/Documents/Eligibility%20and%20Enrollment%20Workgroup/AidCodesandStatuswMap.pdf link no longer works – google it

    IRS Q & A on Medical Expense Deduction – if expenses are more than 10% of income
    irs.gov/Individuals/Questions-and-Answers:-2013-Changes-to-the-Itemized-Deduction-for-Medical-Expenses

    IRS Publication 502 – Medical & Dental Expenses – See page 8 Premiums count in the calculation.
    irs.gov/pub/irs-pdf/p502.pdf

    If the links don’t work, google it

    I was thinking and concerned about this. I can’t even find a part time employee to help out with the SNAFU’s of ACA or to search provider lists. Then people complain they can’t find a job.

    Here’s an article saying that people won’t work, if it causes them to lose subsidy!

    “In particular, the health insurance subsidies that the act provides to some people will be phased out as their income rises—creating an implicit tax on additional earnings—whereas for other people, the act imposes higher taxes on labor from income directly.”

    The law’s exchange subsidies will lower incentives to work through both a “substitution effect” and an “income effect,” the report elaborates.

    In the first, as incomes rise, subsidies fall, which makes work less attractive. In that case, some people will choose not to work or work less and substitute other activities for work. The income effect occurs because the subsidies increase resources for people, which allows them to maintain the same standard of living while working less.

    http://www.modernhealthcare.com/article/20140204/NEWS/302049973/aca-means-bigger-effect-on-workforce-costs-government-1-48-trillion?AllowView=VXQ0UnpwZTVDUFNhL1IzSkUvSHRlRU9yajBnZEErRmU=

  1. What about that legal case pending where one can only get subsidies on a state run exchange, like Covered CA not the federal one – HealthCare.Gov

7 comments on “Premium Subsidy Now or Tax Time?

  1. 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

  2. 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

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