Harry, If you answer no to question 1, you are not eligible for PTC. If I have the math correct, a family of 2 could have about $25,000 in income and pay only approximately $784 in ACA premiums and zero income tax. Understanding MAGI and AGI can save you lots of money. (In 2017 we had to pay back some of the advance premium tax credit because our income overshot our estimate. categories: Taxes keywords: ACA, capital gains, conversion, tax credits, tax planning, Well written and reasoned. Applicable Percentage [From 2016 Form 8962 Instructions, Table 2] 10: Amount to be Subtracted from Line 4 [(Line 5 * Line 9 )/ 12] 11: Monthly Premium Tax Credit [Line 4 - Line 10; or 0 if Line 10 = 0] 12: Monthly Net Cost of Premiums [Line 3 - Line 11] First column shows household % of Federal Poverty Line- if between 100% and 400% continue,otherwise stop (ineligible) 3. The American Rescue Plan Act of 2021 (also known as President Biden’s $1.9 trillion stimulus package) removed the hard cutoff at 400% of FPL in 2021 and 2022. Question 1: Did you or a family member enroll in insurance through the Marketplace? Below we do a walkthrough of filling out the PTC form, and we simplify the terms found within. The minimizing the total healthcare outlay (premiums + out-of-pocket cost) with max available conversion space should be the goal. (When we finally figured out what we were doing, by 2017 our premium was down to $85/mo. It also increases your co-pay and deductible in a Silver plan when you lose the Cost-Sharing Reductions. If you claim a net Premium Tax Credit for 2020, you must file Form 8962. TIP: This page covers Advanced Premium Tax Credit Repayment limits for 2018, 2019, and 2020 plans under the Affordable Care Act (needed for filing for taxes filed April 2019, 2020, and 2021). Premium tax credits are tax credits that can be taken in advance as Advanced Premium Tax Credits or at tax time as Premium Tax credits (or you can do a mix). Here are links to information and resources referenced in the graphic: See the Instructions for Form 8962, Premium Tax Credit, for information about the federal poverty guidelines for purposes of claiming the premium tax credit. If policy holder also goes COBRA, then policy holder is $900 and child adds $350. Copyright © 2021 Advice-Only Financial, LLC. Table 1 shows the full schedule of changes. If you answer no to question 5, move on to the next question. The credit provides financial assistance to pay the premiums for the qualified health plan offered through a Marketplace by reducing the amount of tax you owe, giving you Of course $25,000 income would be “zeroed out” by the standard deduction. You’re not eligible when you only have dividends, capital gains, and Roth conversion income. In 2020, the federal government will once again offer a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange. Of course, contributing to a Trad IRA can also help get you below the cliff (and also was not pointed out by the tax software). He will receive the full premium tax credit amount of $3,412 even though the amount of the credit is larger than his federal income tax liability. As your income goes higher, they expect you to pay a higher percentage of your higher income. percent of the federal poverty line. 4) maximize ACA PTC As usual, great discussion of the issue. Premium tax credit (PTC). A few typos and errors in the above; still, it’ll work….. Hi Harry, Thank you for sharing. ; in 2018 it was $108/mo.) This year I think I’ll direct the increased income to an HSA. That was a hard cutoff. Choose a HD bronze ACA plan to offset some of my taxable income. You are eligible for the premium tax credit if you meet all of the following requirements. I never thought that someone would expect a check in addition to free health insurance. https://www.irs.gov/newsroom/irs-suspends-requirement-to-repay-excess-advance-payments-of-the-2020-premium-tax-credit-those-claiming-net-premium-tax-credit-must-file-form-8962. A higher income times a higher percentage is much more than a lower income times a lower percentage. Figure that one out. My Financial Toolbox guides you to a clear course of action. See the instructions for Form 8962 for more information. There is another wrinkle. Moreover, only those individuals buying health insurance via government-run health insurance exchange are qualified to receive this subsidy. 1545-0074. She doesn’t have to wait until year end. An official website of the United States Government. 2020. What was the option, you ask? (In which case we would’ve simply stayed with our previous employer’s retiree medical plan (RMP).). Hi Harry, But, I don’t know if they go to the level of detail that you were looking for. Fehr R, Cox C, Levitt L, Claxton G. Kaiser Family Foundation. Your eligibility for a premium tax credit is based on the projected income and household information you provide on your Pennie application. You didn’t qualify for a premium tax credit if your income was above 400% of FPL. All rights reserved. The new law changed it to a sliding scale between 4% and 6% of income in 2021 and 2022. To receive a PTC you must split the uprights between making too little and too much income. I think Harry has said it before, and I agree: “healthy” people should give serious consideration to a bronze plan (or Medicaid if eligible), and put the premium savings into an HSA to cover more routine medical care and meds. The key thing that I wanted to raise is that below 133% of FPL, in states that expanded Medicaid, you have a choice to pay up and get on an ACA plan, rather than taking the very dicey Medicaid option. Actually, max subsidy should not be the goal in itself. You should consider the grand total of tax and health insurance premium and out-of-pocket expenses, not just the tax itself. If you answer yes to question 4, you are not eligible for PTC. Required fields are marked *. Questions and Answers on the Premium Tax Credit, Electronic Federal Tax Payment System (EFTPS), Publication 974, Premium Tax Credit (PTC). To be eligible for a Premium Tax Credit, you must buy your health insurance plan through Connect for Health Colorado and meet the income requirements. Our ACA story—> Your email address will not be published. The tax credit … The percentage of income the government expects you to pay toward a second lowest-cost Silver plan depends on your income relative to the Federal Poverty Level. Internal Revenue Service. Interactive Tax Assistant: Am I Eligible to Claim the Premium Tax Credit? When my wife and I retired in 2010, we still had 10 years to go before we were Medicare eligible. I was working with the 2021 CashFlow tax calculator from bogleheads wiki that is linked here to optimize my income/tax/ACA PTC strategy: You only have very limited room to maneuver, such as contributing to Traditional IRA versus Roth IRA, or in your case taking the tuition deduction versus the tax credit. Questions and Answers on the Premium Tax Credit. That would be a substantial change from prior years where the savings could bring the contribution down to zero but no further, meaning the government would never send a check. That way, we were able to continuously track our modified AGI to ensure that we didn’t mistakenly go over a “cliff.”. In 2018, the federal government will once again offer a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange. In my case, I had to predict not only my wages, but also that of my dependents, along with their possible unemployment benefits (which effected *my* Cliff situation)! And fwiw, I don’t think Medicaid has anywhere near the the deductible and max out of pocket limits ACA plans offer. Premium Tax Credit (PTC) Attach to Form 1040, 1040-SR, or 1040-NR. [It is important to note that the premium tax credit can be accessed by lawfully present The actual subsidy is the difference between the benchmark plan and your expected contribution. Question 4: Can you be claimed as a dependent on someone else’s tax return? Personal anecdote: I have not paid income taxes or health insurance premiums for years. Ever since the Affordable Care Act came out, some people who buy health insurance on the ACA exchange have to watch carefully for the premium subsidy cliff.The Premium Tax Credit is cut off at 400% Federal … The tax programs don’t appear to go as far as tracking that or warning of the best options to avoid those “cliffs.” (I use TurboTax.) See ACA Premium Subsidy Cliff Turns Into a Slope In 2021 and 2022. See In their defense, H&R Block, TurboTax, and other tax software are designed as an after-the-fact reporting tool, not a decision recommendation planning tool. If you paid back an Advanced Premium Tax Credit for 2020 on an already-filed tax return, you won’t have to file an amended return and the IRS is going to reimburse you for the repayment you already made. Enhanced Premium Tax Credit. 2019 PREMIUM TAX CREDIT QUICK REFERENCE CHART (Based on 2018 Federal Poverty Lines) 1. This represents 15% of the $10,000 increase in their income. Later in 2014 we came across another similar article, which reinforced what we were doing and gave us more understanding about how to maintain a low MAGI: https://www.forbes.com/sites/carolynmcclanahan/2014/11/14/how-early-retirees-can-get-cheap-health-insurance-through-obamacare/amp/. Any additional income increases your net premium after the PTC. In that state, at least, it’s not. It will also help increase room for trad-to-Roth conversion space. If you make too little, you drop out of Obamacare and into Medicaid. This chart really illustrates the complexity of tax planning taking into account ACA premium subsidies. ), We’ve calculated that if we had to purchase those same ACA health insurance plans (all were the SCLSPs) we selected without the subsidies, it would have cost us about $63,000 more in premiums over that same five-year period. ”. The helpline confirmed something that took me quite some time to ferret out online — you can opt to pay the unsubsidized premium for an ACA plan even though your income is below the 133% FPL threshold and get the far better (yet still sub-standard) insurance. That part didn’t change. It expects you to make the choice by experimenting both ways. The government says based on your income, you are supposed to pay this percentage of your income toward a second lowest-cost Silver plan in your area. Not. List of the Specific Affiliates Claiming a Premium Tax Credit claimed by each affiliate The amount of Premium For a family at 300 percent of FPL, the applicable percentage would fall from 9.83 percent to 6 percent. Then, in 2016 we came across this article, making it clear that more people besides us were rearranging their wealth and doing the same thing: https://www.cnbc.com/amp/2016/01/27/theyre-millionaires-and-they-get-obamacare-subsidies.html. (Accessible Text) The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. To calculate where your income falls relative to the Federal Poverty Line, please see Federal Poverty Levels (FPL) For Affordable Care Act (ACA). March 5, … Add a Roth conversion of approximately $19,000 and one still stays in the 10% tax bracket and generates a bargain tax of $1,900. Given all of the above, ACA PTC will be the difference between 8.5% of 105K and the cost of the 2nd lowest silver plan. (Disclaimer: I came to these same conclusions.). The existing ACA premium tax credit is expanded for taxable years 2021 and 2022. You’ll receive it as an advance credit or claim it as a refundable credit … It’s frustrating to me that, had I not rolled up my sleeves to take a look at the possibilities, I would have been $10K poorer. Footnote about question 5: There are exceptions to the married filing separately rule. I’d like to add something that I learned by recently being forced to deal with a college student about to graduate: Tax savings from HSA will more than cover the “extra” out-of-pocket costs compared to a highly subsidized plan. Premium Tax Credit Allocation Table Attachment for the Application for Quality Jobs Tax Credits Insurance Holding Company System In the table below, enter the amount of tax credits generated by the affiliates within the IHCS. Nothing is straight forward here. Our home state offers PPOs in their exchange. I’ll edit to add “up to the point you get the plan for free.” Getting free health insurance is already a great benefit. Proc. I am paying for my kid’s college tuition and have the choice of taking one of 2 tax credits, or a third choice, a tax deduction. Your health insurance that brings income up to 250 % of their income, ’. ( another college student ), so we were able to continuously track our modified to! 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The ACA was about to roll out, I happened across this article: https //money.usnews.com/money/blogs/on-retirement/2013/11/11/the-obamacare-trick-early-retirees-should-know...

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