If you Signed Up for Insurance Under the Affordable Care Act, You May Be Entitled to a Tax Credit

Jan 05, 2015 By Evan Nielsen In Taxation No Comment Tags : , ,

Approximately 7.1 million Americans signed up for health insurance under the Affordable Care Act. According to a poll taken by the Commonwealth Fund, 73% of people who purchased a health plan through the marketplace are happy with their coverage.  For certain qualified individuals, the Affordable Care Act can make purchasing health insurance even more affordable. And you may even be eligible for the Premium Tax Credit.

The Premium Tax Credit is designed to make health insurance premiums more affordable for moderate-income individuals. It’s a credit you can either take at the end of the year when you file your tax return, or take in advance to lower the amount of your monthly payments. If you decide to take the credit in advance, the credit is paid directly to your insurance company.

Qualifying for the Tax Credit

You may qualify for the Premium Tax Credit if:

  •  The health insurance offered by your employer is lacking, meaning either
    • your employer doesn’t offer health insurance, or
    • the insurance you do have covers less than 60% of benefits, or
    • the cost of premiums on the insurance you do have makes up more than 9.5% of your annual household income.
  • You purchase insurance through the marketplace
  • Your income is between 100 percent and 400 percent of the federal poverty level. This calculator can help you in determining whether your income qualifies.

Applying for the Tax Credit– Be Careful When Estimating Your Income

You apply for the Premium Tax Credit at the time you enroll for health insurance through the marketplace. You will be asked to estimate what you think your total yearly income is going to be. The lower your income, the larger the tax credit you will receive. This is where you need to be careful. If you choose to take the credit in advance and have it paid to your insurance company on a monthly basis, if you underestimate your income, at the end of the year you may have to pay back some of the subsidy. The good news is if you overestimate your income, you could receive money back with your refund.

In certain states, the validity of this credit is being challenged in court and the US Supreme Court is reviewing the issues. There are other important considerations that may also impact your eligibility. The Health Insurance Market Place is currently open for 2015 enrollment through February 15, 2015. If you have questions regarding the Premium Tax Credit, the professionals at Nielsen Law Group can assist you today. Call (480) 888-7111 or submit a web request here.