Premium Tax Credits|Subsidies

Premium Tax Credits for health insurance premiums are available to U.S. citizens and immigrants who are lawfully present and have purchased coverage from the Marketplace. To qualify, their income must lie between one hundred to four hundred percent of the federal poverty level. These tax credits are also available to those who lawfully live in the U.S. and have an income below one hundred percent of the poverty level, but who aren’t eligible for Medicaid because of their immigration status. Generally speaking, foreigners must lawfully live in the U.S. for at least five years to qualify for Medicaid.

Also, in order to qualify for tax credits, individuals must not qualify for other public coverage such as CHIP, Medicaid or other types of military coverage. Individuals also must not have access to health care plans through a current employer. One exception to this rule is if the employer’s plan is not considered affordable to the employee because the share premium that the employee pays for employee only coverage exceeds over 9.56% of the employee’s total income for the year. There is another exception, and that is if the employer does not provide a legal minimum essential level of coverage.

Our company helps Florida residents learn what they need to know about the healthcare Marketplace. If you think you will qualify for premium tax credits, then you should visit our On Marketplace Health Insurance quote engine.  If your taxable household income is greater than 400% of the Federal Poverty Level, then you may want to visit out Off Marketplace Health Insurance Quote engine for a no hassle health insurance quote.

We can help you get enrolled in the best plan for your needs. Here are the answers to some frequently asked questions about healthcare and the Marketplace exchanges.

There are several requirements that must be met in order to be eligible for premium tax credits. These include the following:

• You have purchased your insurance through the Marketplace (a Marketplace Plan)
• You have a certain household income, generally if your household income falls between 100 and 400% of the federal poverty line you will be eligible
• You do not have the option to get insurance through your employer
• You cannot have insurance through any government program
• You are not filing a Married Filing Separately tax return
• You are not a dependent of someone else

Those who meet all of these requirements, will find that they may get premium tax credits.

Premium tax credits are estimated when you apply for health coverage in the Marketplace.(apply for a Marketplace health plan.) The estimation is based on your current family and projected taxable household income for the upcoming year. When your tax credit has been estimated, you can then decide to take (use) the estimated tax credit and apply it to your health coverage plan payment, in order to lower your monthly plan. (Or)On the other hand, you can choose to wait and claim the entire tax credit on your Tax Return the following year. If you do apply the tax credit to your health plan in advance, you will reconcile the credit when filing your taxes.

Yes, you can apply any earned tax credit to any plan including a  Platinum, Gold, Silver or Bronze plan that is offered through the Marketplace. Tax credits are not eligible to be applied to stand-alone dental plans or Catastrophic plans.

NOTE: If you also qualify for cost sharing reductions, note that these can only be earned through Silver plans that are offered through the Marketplace.

Tax credit for premiums reduce the overall premium for many Marketplace policies. Your overall income and cost of Marketplace health care plans in your area determine how much tax credit you can receive. When you apply for coverage, the Marketplace will figure out the expected contribution that you will be required to pay toward the health care premium for a Silver (mid-range) plan. This contribution will be increased on a sliding scale of sorts, based on your total yearly income. Should your income be close to the poverty level, you will be expected to contribute 2.01% of your total income to the plan. If your income gets closer to 400% of the federal poverty level, your expected contribution will be 9.56% of your income. The difference between your expected contribution, and the premium for the benchmark plan, is the amount of tax credit you will earn. However, take note that you are not required to pay more than the premium for the plan. When you apply in the Marketplace, you will be informed of the total dollar amount. Then, you can use that total amount to pay the premium for a Platinum, Gold, Silver or Bronze plan. Credit cannot be used towards paying for a Catastrophic plan.

Tax credits for premiums can also be claimed at the end of the year, or you have the option of applying for an advanced tax credit that will be based on income for the next year. Should you choose to receive any type of advanced credit, the federal government will pay one twelfth of the credit straight to your insurance company every month, and you will be billed directly for the remaining amount of the premium.

Also, during Open Enrollment when you apply for a premium tax credit, it’s important to remember that you won’t necessarily know your total income for the upcoming year. So you will be applying based on your best estimate of what you think your income will be in the coming year. After Open Enrollment, when you file a tax return, your actual income will be compared to amount of premium tax credit that was claimed previously. If you earned more than you estimated and earned too much tax credit, it’s possible that you may be required to pay back some or all of the difference. If you didn’t receive enough tax credit that you are entitled to, you are entitled to claim the difference on your tax return. Any changes in your annual income should be reported to the Marketplace. This helps to adjust credits and to avoid paying any significant amounts of money at the end of the year.

It’s your choice. You have the option of paying one twelfth of your annual tax credit to your existing health care plan. This will help you reduce monthly premiums immediately. Another option is to pay the cost of your entire health care plan premium at the beginning of the year and then gather any premium tax credits in lump sums the following year after you file the tax return. You will also have the option of having tax credits paid straight to your insurance company and having some saved to be amassed at the end of the year.

Remember that when you fill out the application for credits while Open Enrollment is ongoing, you may not know what your income for coming year will be. Obviously, you should apply based on the best evaluation of your income. When your tax return is filed to the IRS the following year, your actual income will be compared to the tax credit you claimed previously. If, when you applied for the tax credit, your total income was underestimated, you may be responsible for paying back part or the entire differing amount. On the other hand, if you didn’t collect all the tax credits that you should have earned over the course of the year, you will have the option of claiming the difference on your tax return.

In the case that you aren’t sure what your income for the coming year will be, you will also have the option of modifying the tax credit amount for the year based on your income changes. For example, if you are currently unemployed, you will have the option of applying for tax credits based on your existing low income. If you find a new job as the year goes on, you should report this increase to the Marketplace to lower the amount of tax credits you are currently receiving.

Generally speaking, if you are currently using or are eligible for the following coverage types, you are ineligible for Marketplace premium tax credits:

• Employer-based coverage, unless this coverage is not affordable to you (in this case, it means that your contribution for premiums for yourself in the current year will exceed more than 9.56% of your total household income) or doesn’t meet minimum value (the actuarial value being less than 60%). When it comes to the affordability of family plans, coverage is a concern.

• Coverage sponsored by the government, such as Medicare Advantage plans, Medicare Part A coverage, Medicaid coverage, CHIP, TRICARE and Veterans health coverage.

• Plans for Peace Corps volunteers

On the other hand, if you have access to other coverage plans, you may be eligible for premium tax credits if you meet other necessary requirements:

• Student health coverage
• COBRA coverage
• Non-group (individual) health insurance
• Coverage under a parent’s group health plan as a dependent if you are less than 26 years old and also not claimed as a tax dependent by the parent

Retiree health coverage that is offered from a former employer

It’s possible to add any dependent children to your current Marketplace plan. However, because they are currently qualifying for CHIP, they will not qualify for additional premium tax credits. One of the only exceptions to his rule is if you live in a state that has a waiting list for CHIP enrollment. If they are waiting to enroll in CHIP, your children will qualify for a premium tax credit. However, when the waiting period is over, they will have the option of enrolling in CHIP and won’t qualify for the tax credit.

The requirement to earn tax credit depends on your Modified Adjusted Gross Income (also known as MAGI). When your federal tax return is filed, it’s required that you report adjusted gross income (this includes salaries and wages, unemployment benefits, dividends and interest and other sources of income). Your Modified Adjusted Gross Income serves to modify adjusted gross income by adding it to any non-taxable Social Security benefits that you may receive, any foreign income earned that was excluded from your income and any tax-exempt interest earned.

It’s important to note that eligibility for CHIP and Medicaid is based on MAGI. But keep in mind that some modifications may be made in determining eligibility for these types of programs. To learn more, contact your state Medicaid office or Marketplace if you have more questions.

Yes, any Social Security benefits are counted to determine your eligibility for tax credits.

When you are submitting an application for a tax credit, you will need to enter in an expected income for the next year. Typically, a good place to begin is to think about the income you earned this year and the income that you reported on your tax return last year. As you may know, circumstances do not always stay the same. For example, if you have lost your job, you should make the best guess as to what your income will be the upcoming year. The Marketplace will take these estimates and compare them against records from the Social Security, IRS and other sources. Should official records and your estimates not match while other eligibility requirements are met, you will be required to provide additional documentation to support any income projections.

If you are unable to provide the documentation required, the Marketplace will give out subsidies for up to 90 days in order to give you time to find and submit documentation for verification. Regardless of the grace period, it’s important to provide documentation in a timely manner. Failing to do so could result in a reduction or loss of subsidies.

Remember that if you make an incorrect assumption on your income and claim more subsidies than you are eligible for, you could have to pay back part or all of the tax credit that you have received. In the case that you overestimate income and claim less than you should receive, the difference will be included in your tax return the following year.

No. Your average income is too low to be eligible for any tax credits.

For many people, it is common for income to fluctuate, especially if you perform seasonal work, have a few different jobs or are self-employed. In order to receive the most accurate tax credit for your premiums, it’s important to report any income changes to the Marketplace throughout the year. Otherwise, if you sign up and claim a premium tax credit during the year based on your estimated income and your actual earned income puts you over 400% FPL, you will be responsible for paying back the full amount of credits.

To avoid having this happen and if you estimate that your annual income will be close to 400% FPL, you have the option of waiting until you file taxes to take the portion of your tax return instead of receiving advanced payments.

There are no limits regarding the quantity of times an individual can report family, income or eligibility changes in the Marketplace. When you report a change to us, it will then need to be verified.

The Marketplace will then send a notice to you (also known as redetermination notice) to show your edited eligibility for reductions and tax credits. In addition, you can always contact the marketplace  to provide information about your premium credit for your monthly advance, if it is underneath the amount that the Marketplace determined that is needed based on a household’s total income. This can be done if an individual wants to reduce the necessity of having to pay money when the tax return is filed.

Once you have reported a change, the adjustment will come into effect on the first day of the next month following the re-determination notice.

Yes, this is possible. The Marketplace will designate your monthly advance payments between both plans. In some cases, the monthly advance payment will be allocated in proportion for the premiums in both plans.

No, cost-sharing reductions can only be used when enrolled in a Silver plan. These cost sharing reductions cannot be used if you enroll in Platinum, Gold or Bronze plan. Keep in mind that this is a different rule than the rule that applies for premium tax credits. There is the option of applying tax credits to every type of plan. But if you can qualify for both subsidies, these subsidies can only be used for a Silver plan.

No. Cost sharing subsidies are different from tax credits because they are calculated on the income you have actually earned. Reductions will not be reconciled.

No. Tobacco surcharges are not covered by tax credits. It’s important to note that the premium tax credit reduces what you pay for premiums, but you will be required to pay the entire cost of the tobacco surcharge.

It’s possible to add any dependent children to your current Marketplace plan. However, because they are currently qualifying for CHIP, they will not qualify for additional premium tax credits. One of the only exceptions to his rule is if you live in a state that has a waiting list for CHIP enrollment. If they are waiting to enroll in CHIP, your children will qualify for a premium tax credit. However, when the waiting period is over, they will have the option of enrolling in CHIP and won’t qualify for the tax credit.

COBRA does not affect any eligibility for premium tax credits. The important thing to consider is that you can only cancel COBRA and enroll in tax credits and a Marketplace plan during the period of Open Enrollment. To cancel your COBRA coverage, you will have to cancel COBRA coverage on the same date that your Marketplace coverage will begin. On the other hand, if you cancel COBRA outside the dates of Open Enrollment, you will not be able to sign up for coverage and will have to wait until the next dates of Open Enrollment.