I am looking at a subsidy for health insurance that significantly brings costs down in the marketplace. What’s the catch? Will I end up in trouble with my taxes? By the way, I live in Michigan
A subsidy is basically an advanced premium tax credit.
As long as you qualify for APTCs to keep monthly costs below what you can afford, there won’t be big tax issues if your income is kept up to date as it changes. If you say your income is lower than it really is and you get a subsidy, you might have to pay some of it back when tax time comes. The amount you pay back depends on where your income stands compared to the federal poverty level.
KFF has a good overview of APTCs here: https://www.kff.org/affordable-care-act/issue-brief/explaining-health-care-reform-questions-about-health-insurance-subsidies/
@Payton
So if I fill out my tax return correctly, it won’t change, right?
Quinn said:
@Payton
So if I fill out my tax return correctly, it won’t change, right?
Look at this info from the IRS:
>The Premium Tax Credit is a refundable tax credit that helps qualified people and families with low or average income afford health insurance bought through the Health Insurance Marketplace, also known as the Exchange. The size of your Premium Tax Credit is based on your income. Lower income means a bigger credit to help cover insurance costs. When you sign up for Marketplace insurance, you can opt for the Marketplace to calculate a credit that goes to your insurance company to lower what you pay for monthly premiums (advance payments of the Premium Tax Credit, or APTC). You can also choose to get the credit when you file your taxes. If you select advance payments, you’ll balance the amount paid in advance with the actual credit when you do your taxes. Either way, you’ll need to fill out Form 8962, Premium Tax Credit (PTC) and attach it to your tax return.
>The credit is “refundable” meaning if the credit amount is higher than your tax due, you’ll get the difference back. If you owe no taxes, you can receive the full amount of the credit as a refund. But, if advance payments were made and your actual allowable credit is less than those advance payments, you will see that difference deducted from your refund or added to what you owe for tax years aside from 2020.*
@Payton
Oh okay so it’s just an advance. If I don’t take the subsidy, I get it back on my tax return?
Quinn said:
@Payton
Oh okay so it’s just an advance. If I don’t take the subsidy, I get it back on my tax return?
Most likely. The IRS will check your modified AGI when you file your taxes against what you listed as income on your subsidy form. If you earn more, your credit will be smaller but if you claim less income, you could get a bigger refund.
You could also choose to not use the entire tax credit for your premium. This gives you some buffer in case your income goes up.
A subsidy means you get an advance premium tax credit. If your income is estimated right, there won’t be issues with taxes at the end of the year. When I was eligible for a subsidy, I only claimed part of it and later got a tax credit for what I didn’t use.
@Jalen
So if I’m careful when filling it out, I should be fine? It’s just like getting free help for insurance?
Quinn said:
@Jalen
So if I’m careful when filling it out, I should be fine? It’s just like getting free help for insurance?
If you judge your income accurately, you are good. If your income is slightly different than estimated, you will get a little less or more back on your taxes, depending on how much you were off.
@Crosby
So to be safe, should I overestimate?
Quinn said:
@Crosby
So to be safe, should I overestimate?
It isn’t a big deal if you overestimate or underestimate. There aren’t huge benefits to either. If you overestimate, you get less subsidy but you’ll get that difference back at tax time. If you underestimate, you will get a bigger subsidy but will need to pay some back.
Quinn said:
@Jalen
So if I’m careful when filling it out, I should be fine? It’s just like getting free help for insurance?
It’s a government subsidy to help you with insurance.
False alarm, I don’t think I qualify for the subsidy because my job provides health insurance 
Quinn said:
False alarm, I don’t think I qualify for the subsidy because my job provides health insurance
Is your workplace health insurance less than 9.5% of your income? That’s the limit for it to be called “affordable.”
@Vern
I make $25 an hour. It would be $143 a week for both of us or $59.59 just for me.
Quinn said:
@Vern
I make $25 an hour. It would be $143 a week for both of us or $59.59 just for me.
Why aren’t you signing up for workplace insurance? Aside from being cheaper, your premiums are also taken out before tax, so you end up saving 20-30% depending on your yearly earnings.
Quinn said:
@Vern
I make $25 an hour. It would be $143 a week for both of us or $59.59 just for me.
I don’t know how many hours you work weekly, monthly, or yearly.
Quinn said:
@Vern
I make $25 an hour. It would be $143 a week for both of us or $59.59 just for me.
I don’t know how many hours you work weekly, monthly, or yearly.
I do 40 hours a week but sometimes it ranges between 40-47.
Quinn said:
@Vern
I make $25 an hour. It would be $143 a week for both of us or $59.59 just for me.
You likely wouldn’t qualify for the subsidy as the employee-only rate is lower than the affordability limit. Your spouse might qualify if she doesn’t have insurance from her job.