Wondering about how Obamacare impacts your taxes? And if having an Affordable Care Act plan can translate into more money back?
Obamacare and the premium tax credit
If you have an Obamacare plan through the Health Insurance Marketplace, then you may qualify for what’s known as a premium tax credit. The premium tax credit was established by the Affordable Care Act. It makes health insurance premiums for coverage purchased through the Health Insurance Marketplace more affordable for eligible individuals. The premium tax credit is the main way that having Obamacare impacts your taxes.
How to qualify for a premium tax credit
Whether you apply for Marketplace insurance through HealthCare.gov or an official partner like HealthSherpa, you’ll find out if you might be eligible for a premium tax credit. You can qualify for a premium tax credit whether you enroll during Open Enrollment or during a Special Enrollment Period. You can use your income to estimate whether you will qualify for the premium tax credit and how much that credit might be.
Grab our free guide to enrolling in Marketplace health insurance for more information.
How to use your premium tax credit
Qualify for a premium tax credit? You can use this tax credit to reduce the amount you pay in premiums for your Obamacare care plan. The premium tax credit is applied against each month’s individual premium. You can elect to use all or some of it against your monthly premiums.
Want to use your premium tax credit? Then the Marketplace will go ahead and issue your tax credit directly to your insurance company each month. This way, you don’t have worry about anything on your end when it comes to receiving your discounted rate. Elect to use your premium tax credit to reduce your monthly premium amount? Then this is an “advance payment of the premium tax credit.”
What to do if your income changes
If your income goes up or down in a given calendar year, this will impact your premium tax credit amount. If you are aware of any significant changes to your income in real time, report them to the Marketplace. This way, you can adjust your premium tax credit amount. This will ensure you don’t owe for your Obamacare on your taxes. When you prepare your annual income tax return, you will reconcile your premium tax credits against your income.
Using your 1095-A form, you will see if, based on your actual end-of-year household income for that tax year, you may need to pay back any of the money you received in tax credits for your Marketplace insurance in your taxes. Conversely, you might also find that you receive additional money back on your taxes in the form of a tax refund after you reconcile your 1095-A form for the year. This is why it is essential that you have form 1095-A on hand before you begin preparing your taxes if you are insured through the Marketplace.
State individual mandates
The federal individual mandate has been repealed, meaning there is no longer a tax penalty if you do not have health insurance coverage in most states, but we still recommend getting comprehensive coverage to protect yourself against high medical costs. It’s important to know that if you live in California, DC, Massachussetts, New Jersey, or Rhode Island, you may still have to have coverage in 2020 or pay a fine.
How to get an Obamacare plan
If you have an Obamacare health plan and have any questions about how premium tax credits work with your plan, you can always contact a HealthSherpa Consumer Advocate for help at (872) 228-2549.
If you’re interested in enrolling in a health insurance plan from the Marketplace, you can shop for plans here, call a Consumer Advocate at (872) 228-2549, or enter your zip code below to see available plans in your area.
Marketplace plans can be quite affordable, especially if you qualify for subsidies. Most consumers who use HealthSherpa pay $35/month or less for ACA health coverage.
Medicaid, CHIP, and Medicare
Some people may qualify for other coverage options as well. If you are low income, then consider applying for Medicaid or CHIP (Children’s Health Insurance Program). You can apply for Medicaid or CHIP at any time, even outside of Open Enrollment, and if you qualify you can enroll and have your health coverage start almost immediately. For Medicare, those who are eligible can apply when they turn 65.