Avoid tax surprises related to the Affordable Care Act

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Matt Weyers Insurance Specialist
Matt Weyers
Insurance Specialist

As we approach the five-year anniversary of the day President Barack Obama signed the Affordable Care Act into law, we are still seeing some challenges related to the way people are navigating their way through that historical healthcare overhaul.

One significant change that is posing major challenges to American taxpayers is that, for the first time, upfront tax subsidies/credits related to individual health insurance are tied to income projections. The trick is that subsidies and credits are calculated on an income projection for an entire year.

Since most people elected to take the subsidy/credit upfront and lower premiums throughout the year, they are finding that they have to pay back part or all of their subsidies on their 2014 returns, because when they estimated their income for 2014 in 2013, they didn’t take into account all sources of income that will count towards their modified adjusted gross income.

In some cases, it was extra withdrawals from retirement accounts that they didn’t plan on taking.  For others it was picking up more hours at work, bonuses at work, or a pay raise.  Even an unexpected inheritance from a family member can throw off even the most carefully planned income estimate.

One way to take the guess work out of the equation is to elect the option to take any subsidy/credit when you file your taxes, instead of upfront.

If you don’t want to wait to get your subsidy/credit, here is the big take away: you can adjust your income level used to calculate your subsidy/credit amount at any time during the year.  If you are computer savvy and used the healthcare.gov website Marketplace to enroll for coverage you need to report a life change and follow the steps until you can edit your income projection for the year.  If you would rather call the Marketplace, you have that option as well, the phone number is 1-800-318-2596 and it is available 24 hours a day except on federal holidays.

The important thing to know is that you have the ability to be proactive and lessen any tax impact that may occur.  At Winch Financial we have a dedicated insurance department designed to be a ready resource to you. If you have questions, please  call or email to set up an appointment. I would be glad to review your policies and walk you through your options to avoid tax surprises down the road.