Small Group Stays
- Thread starter ABC
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The ACA provides two forms of subsidies to help pay for health insurance. First, a monthly premium assistance tax credit will lower the premium amount an individual or family must pay. Second, cost-sharing assistance will limit a person's maximum out-of-pocket costs, and for some it will also reduce other cost-sharing requirements (i.e., deductibles, coinsurance, co-payments).
Premium Limits for Consumers Based on Income
Income
Premium Limit
Up to 133% FPL 2% of income
133 - 150% FPL 3 - 4% of income
150 - 200% FPL 4 - 6.3% of income
200 - 250% FPL 6.3 - 8.05% of income
250 - 300% FPL 8.05 - 9.5% of income
350 - 400% FPL 9.5% of income
Out-of-Pocket Spending Limits for Consumers Based on Income
Income
Out-of-Pocket Limit (based on 2011 HSA limit)
100 - 200% FPL 1/3 HSA limit ($1,983/individual; $3,967/family)
200 - 300% FPL 1/2 HSA limit ($2,975/individual; $5,950/family)
300 - 400% FPL 2/3 HSA ($3,967/individual; $7,933/family)
Above 400% FPL 100% HSA limit ($5,950/individual; $11,500/family)
Health Insurance 101
Premium Limits for Consumers Based on Income
Income
Premium Limit
Up to 133% FPL 2% of income
133 - 150% FPL 3 - 4% of income
150 - 200% FPL 4 - 6.3% of income
200 - 250% FPL 6.3 - 8.05% of income
250 - 300% FPL 8.05 - 9.5% of income
350 - 400% FPL 9.5% of income
Out-of-Pocket Spending Limits for Consumers Based on Income
Income
Out-of-Pocket Limit (based on 2011 HSA limit)
100 - 200% FPL 1/3 HSA limit ($1,983/individual; $3,967/family)
200 - 300% FPL 1/2 HSA limit ($2,975/individual; $5,950/family)
300 - 400% FPL 2/3 HSA ($3,967/individual; $7,933/family)
Above 400% FPL 100% HSA limit ($5,950/individual; $11,500/family)
Health Insurance 101
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- #23
- 4,096
Well, it should be very interesting to see how this works.
I don't understand how the Gov. can call a premium subsidy that is being paid directly to the carrier a Tax Credit. That is not the definition of a tax credit.
I don't understand how the Gov. can call a premium subsidy that is being paid directly to the carrier a Tax Credit. That is not the definition of a tax credit.
Cash for clunkers was, in essence, a tax credit that was paid to car dealers.
It is the government's game. They can call it anything they want.
Kind of like calling Alibamacare the Affordable Care Act when there is nothing affordable about it.
It is the government's game. They can call it anything they want.
Kind of like calling Alibamacare the Affordable Care Act when there is nothing affordable about it.
I see your reasoning, ABC. My husband is an accountant, so I'm pretty familiar with tax credits. The govt has become loose with their terminology lately. Traditionally, a tax credit is claimed on one's income tax return.
However, lately the govt has been making them advanceable (meaning you get the credit NOW, not when you file your taxes), and refundable (meaning you get the credit whether you have a tax liability or not), and the govt has been changing the way the flow of funds normally occur for a tax credit.
Like Somarco said the cash for clunkers was paid to car dealers. This PPACA "tax credit" subsidy doesn't have anything to do with taxes at all (other than it costs all of us taxpayers a whole lot of money). The credit flows from the IRS to the insurance company, and the insurance company lowers the client's bill. The client never touches the money, and it has nothing to do with the client's tax return. Well, except in one case. If the client makes too much money, the client can have a "clawback" on their tax return, and the client will owe the IRS money.
They really should never have called it a tax credit at all. It's a subsidy.
And, exactly as Dave020 said, there is a premium subsidy "tax credit", and there is a cost-sharing subsidy in PPACA. By the way, there is also a small business tax credit, which is a tax credit in the most traditional sense of the word.
Yes, in the scenario you described, they will get their refund.
However, if they had an increase in income and it turns out that they were not eligible for that $10,000 subsidy, then they will have a clawback. They will owe the IRS part of the subsidy money back. If they don't pay it, the IRS will take it out of their refund.
However, if they had an increase in income and it turns out that they were not eligible for that $10,000 subsidy, then they will have a clawback. They will owe the IRS part of the subsidy money back. If they don't pay it, the IRS will take it out of their refund.
Ann must of misunderstood the question, or maybe I am.
The answer is NO. If they owe 5k in taxes, they will pay 5k in taxes. If they are due a 4k refund, they will get a 4k refund.
The 10k premium subsidy does NOT factor into what they owe or what they get for a refund (assuming stagnant income). The 10k is sent directly to the insurance company, independent and outside of their tax filing.
Now, if they make more money, then part of that subsidy will be clawed back through their tax form and affect taxes owed/refund, because they were not eligible for the higher subsidy.
The application will allow for the client to manually request a reduced subsidy if they wish to avoid this clawback issue. A person would only do this if they expect their income to be higher this coming year vs. the prior tax year.
Well, I think there was some misunderstanding of the original question. Actually, Yagents and I see this process the exact same way. Let me just clarify, by using 2 viewpoints of the original question.
The original question was:
So if a consumer gets 10,000 worth of susidy to perchase health insurance and only owes 5k in taxes but when they file there tax return they have a 4k tax refund due them. Do they get the 4k refund or not?
My understanding of the question and therefore my answer -
The $10,000 subsidy is irrelevant to the person's tax return. If they only owe $5,000 in taxes and are due a $4,000 refund, that means they paid in $9,000 of estimated tax or payroll deducted tax for the year. In that case they will get their $4,000 refund unless there is a clawback.
The other understanding of the original question -
The $10,000 subsidy is irrelevant to the person's tax return. If they owe 5k in taxes, they will pay 5k in taxes. If they are due a 4k refund, they will get a 4k refund. Their tax return is not applicable unless there is a clawback.
In all these situations Yagents and I agree. The person's tax return is irrelevant when it comes to the flow of subsidy funds. Their income as a percentage of FPL is relevant, but when it comes to how the funds are dispersed, the person's tax return is not relevant. The funds never flow through the person's tax return, nor through the person's paycheck or checkbook. The subsidy funds flow directly from the IRS to the insurance company. Then the insurance company issues a discounted invoice to the insured for the remainder of the premium. The only time a tax return is involved is if the person's income turns out to high enough that they didn't actually qualify for the subsidy, and the person is subject to a clawback.
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