How to Qualify for ACA Healthcare Extended Subsidies
Democrats’ latest stimulus bill includes a temporary $ 36 billion expansion in tax breaks for Obamacare, making it easier for middle-class people to qualify for subsidies on their monthly premiums in 2021 and 2022. The law also increases the size of these subsidies, and removes a rule that could come as an unpleasant surprise during tax season. Here’s what you need to know.
Wait, are there monthly health subsidies?
Yes indeed. Millions of Americans are no longer taking advantage of the Premium Tax Credit (PTC) applicable to Affordable Care Act plans purchased through the Health Insurance Marketplace . PTC is a sizable monthly discount ( $ 512 average) that allows you to qualify for the best coverage.
Currently, qualifications depend on whether your income is between 100% and 400% of the poverty line (just over $ 51,000 per person in 2020), your age, family size, and where you live. The loan is on a sliding scale that pays out more if you do less and is refundable, which means you will receive a cash refund if your loan exceeds your taxable liability. More information can be found here .
So what has changed?
Subsidies will be increased at every level of income, thereby reducing the percentage of your income is required for participation in the plan (more information can be found at Health News KFF). To get a rough idea of how rates have gone up, check out this table that compares rates for 2020 and 2021 . Most of the people in this table will save roughly $ 50-100 per month, although the subsidy can vary based on income, age, or location.
The other big change removes the “subsidy cut,” which describes how your PTC subsidy drops sharply when your income is above 400% of the poverty line. Since tax filers may choose to receive a loan on a monthly basis as an advance based on their estimated annual income, many are caught off guard when their actual income increases throughout the year and strips them of their eligibility to participate in the PTC. In this case, the borrower only learns at the time of paying taxes that he has to repay all these monthly IRS loans – a total amount that can be up to several thousand dollars.
This fix removes a sharp 400% cut by limiting the percentage of income that can be paid for health insurance premiums to 8.5% for those above the threshold, while still allowing them to qualify. This fix is intended to prevent scenarios in which households pay half of their annual income in premiums.
Per MedPage Today , the invoice also includes a “leave to pay” applicable for the 2020 tax year. Again, this saves you from cutting subsidies as people earning more than originally anticipated will not need to return additional tax credits.
Finally, a special rule allows anyone who has received at least one week of unemployment insurance to exclude any income in excess of 138% of the poverty line when calculating their eligibility for tax credits.
How to get PTC
To find out if you are eligible for a medical loan, you can start with this flowchart . If you qualify, you must file IRS Form 8962 along with your Form 1040. The only caveat is that these changes are part of a bill that has not yet entered into force, although further changes seem unlikely now that the bill has passed through the Senate. (Democrats are hoping to pass the law on Tuesday). In the meantime, you have the opportunity to adjust your plan, since a special registration period is open right now .