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

IRS.Gov Publication 5120 Take all, some or none of advance subsidies.

Covered CA Brochure – Subsidy NOW or Tax Time?

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

Explanation of Advance Premium Tax Credit  –

Take Credit now or later

  

Federal Poverty Level &
Program Chart

Medi-Cal?  Covered CA Subsidies?  Enhanced Silver?
MAGI Income Chart

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?

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.  
  4. 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.

IRS #Pub974 

Premium Tax Credit
IRS Publication 974

VIDEO What is APTC Advance Premium Tax Credit

 

aptc interactive assistant

Interactive Tax Assistant (ITA)

Am I eligible to claim the Premium Tax Credit? 

IRS FAQ on Premium Tax Credit

Learn More About Your Health Insurance Tax Documents | Covered California VIDEO   

 

Tax #Estimators

 

 

ACA What You Need To Know  #5187 ACA What you need to know # 5187

Health Net VIDEO
How to get subsidies – pay less for coverage 

 
 
Kaiser Foundation reports that 27% of uninsured individuals are eligible to purchase a bronze plan with $0 premiums after subsidies in 2019.  Silver plans with cost-sharing reductions (CSR) for single individuals with incomes below 200% of the poverty level can be purchased for roughly $20 to $130 per month after subsidies, depending on an enrollees’ income. KFF *

10 comments on “Premium Subsidy Now or Tax Time?

  1. 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?

    Arguments –

    No

    When a Covered CA  application is submitted, clients are asked if they want to see if they qualify for medi-cal or premium assistance.

    If the question is answered “No” then the income and tax information will be skipped and no Premium assistance will be applied.  They can not claim any assistance regardless of where the income falls under the FPL when they file taxes.

    If they want to be considered to get Premium assistance, the answer to that question needs to be “Yes.”

    If clients want to pay the full amount but be considerer for  Premium assistance, they need to select “yes” on the help paying insurance question and then adjust the premium assitance to $0. When they do their taxes, if they should have been receiving premium assistance, they get a credit .  Response By Email (Argelia) (09/08/2016 11:56 AM)

    Yes

    • Page 4 of publication 974 gives the rules for taking the credit, nowhere does it say you have to get permission from Covered CA first!
    • IRS.Gov FAQ’s # 3  When you apply for coverage in the Marketplace…If you do not opt for advance credit payments or the Marketplace determines that you were not eligible for advance payments at the time of enrollment, you may be eligible to claim the credit when you file your tax return for the year, which will either lower the amount of taxes owed on that return or increase your refund.
    • In bottom third of Publication 974 flow chart, it’s only an issue if your income winds up at less than 100% of poverty level.
    • Nowhere on Form 8962 Premium Tax Credit (PTC) does it ask if you told Covered CA or any Market Place that you wanted the APTC credit in advance.
    • Covered CA is mandated to give you a 1095 A, if nothing else so that you don’t have to pay the mandate penalty.  We are talking about PTC not APTC.
    • CFR 1.36 B-2 Eligibility for Premium Tax Credit

    One should NEVER rely on anything Covered CA or any Insurance Company says!  Even if it’s in print!!!  Insure Me Kevin.com where Covered CA gave the wrong answer about Social Security counting for MAGI.

    View the discussion InsureMeKevin.com  blog.

    No

    The original bill H.R. 2775 was introduced into the House of Representatives on July 22, 2013, and was called the No Subsidies Without Verification Act. It sought to declare that no premium tax credits or reductions in cost-sharing for the purchase of qualified health benefit plans under the Patient Protection and Affordable Care Act (PPACA, often informally referred to as “Obamacare”) shall be allowed before theSecretary of Health and Human Services (HHS) certifies to Congress that there is a program in place, consistent with PPACA requirements, that verifies the household income and coverage requirements of individuals applying for such credits and cost-sharing reduction.[2] The bill passed the House on September 12, 2013.  Wikipedia

    42 U.S. Code § 18081 – Procedures for determining eligibility for Exchange participation, premium tax credits and reduced cost-sharing, and individual responsibility exemptions

    (a)Establishment of program The Secretary shall establish a program meeting the requirements of this section for determining—

    (1) whether an individual who is to be covered in the individual market by a qualified health plan offered through an Exchange, or who is claiming a premium tax credit or reduced cost-sharing, meets the requirements of sections 18032(f)(3),18071(e), and 18082(d) of this title and section 36B(e) of title 26 that the individual be a citizen or national of the United States or an alien lawfully present in the United States;
    (2)in the case of an individual claiming a premium tax credit or reduced cost-sharing under section 36B of title 26 or section 18071 of this title
    (A) whether the individual meets the income and coverage requirements of such sections; and

    (B) the amount of the tax credit or reduced cost-sharing;

    (3) whether an individual’s coverage under an employer-sponsored health benefits plan is treated as unaffordable under sections 36B(c)(2)(C) and 5000A(e)(2) of title 26; [1] and
    (4) whether to grant a certification under section 18031(d)(4)(H) of this title attesting that, for purposes of the individual responsibility requirement under section 5000A of title 26, an individual is entitled to an exemption from either the individual responsibility requirement or the penalty imposed by such section. Read More 
    .

    One comment on “Credit APTC at tax time if not requested when you enroll?”

    1. Kevin Knauss says:

      I agree that the consumer should be able to reconcile the PTC on their taxes with Form 8962 regardless of whether they opted in for a subsidy or not. I think Covered California is pointing to condition 1b above that the person was not eligible for minimum essential coverage from the government. The only way to know that is to do an income test and see if the individual or family is deemed Medi-Cal.

      However, we all know some family’s may have low monthly incomes, but still have a MAGI that is over 138% of the FPL at tax time. So technically, they weren’t eligible for Medi-Cal from the IRS standpoint. But because Medi-Cal is based on monthly income, CC deems them eligible, and indirectly ineligible for PTC.

      It has not gone unnoticed by people at Covered California that a family that truly won’t have a final MAGI below 138% of the FPL is being forced to be creative on the income section of the application. Some people say they are being forced to lie about their income to avoid Medi-Cal. But in reality, they are not eligible for Medi-Cal.

  2. Should I file an appeal regarding lack of premium assistance for part of last year?

    Covered CA probably thought we were only a family of 2, which would make our income greater than the 400% line. They just needed to correct it to family of 3.

  3. 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

  4. 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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