Subsidy Question....

[sshafran]

I don't do ACA - just Medicare - someone asked a question about the subsidies and I told them I would ask the forum that I participate on.

Healthcare dot gov gives the plans, pricing, etc. Subsidy based on income.

If the person underestimates his income (even if by a lot), I told him he would need to "pay back" the subsidy. I knew that much just from occasionally reading some of the general health ins threads.

He wanted to know if there was any "penalty" for underestimating income.... i.e., interest, etc.

So if he estimates $30K and gets a subsidy, ends up making $45k, I know he would have to pay the difference... but would he have to pay anything extra? Also, when would he pay back the subsidy? In 2017 after his taxes are filed? Or some time during the current year once he realizes that his income will be higher than expected?



Then, my question after talking to him, what is there to stop everyone from underestimating income, getting free ins, and then prepping to "pay back" the subsidy the following year? Couldn't they think of it as an "interest free loan"?

 

[OregonDave]

If the income reported is more than 10% less than what he reported last tax year he will need to prove his income or lose the subsidy for failing to verify his income.

 

[Yagents]

I don't do ACA - just Medicare - someone asked a question about the subsidies and I told them I would ask the forum that I participate on.

Healthcare dot gov gives the plans, pricing, etc. Subsidy based on income.

If the person underestimates his income (even if by a lot), I told him he would need to "pay back" the subsidy. I knew that much just from occasionally reading some of the general health ins threads.

He wanted to know if there was any "penalty" for underestimating income.... i.e., interest, etc.

So if he estimates $30K and gets a subsidy, ends up making $45k, I know he would have to pay the difference... but would he have to pay anything extra? Also, when would he pay back the subsidy? In 2017 after his taxes are filed? Or some time during the current year once he realizes that his income will be higher than expected?



Then, my question after talking to him, what is there to stop everyone from underestimating income, getting free ins, and then prepping to "pay back" the subsidy the following year? Couldn't they think of it as an "interest free loan"?

Yes, you could consider it an interest free loan, but it eventually all reconciles when they file taxes by April of the following year. Don't know many low income people that can put money aside to pay back the APTC in full. They are supposed to call HC.gov to update their income if changes occur mid-year. Ultimately, it's the honor system. The law dictates that you "estimate" your future years' income, you can't be held liable for a truthful estimate. What's interesting.........is the CSR deductible reduction amount is not clawed back. The only penalty that may occur would be the underpayment of taxes. But, that's for an accountant to answer, or Ann.

 

[Chazm]

Yes, you could consider it an interest free loan, but it eventually all reconciles when they file taxes by April of the following year. Don't know many low income people that can put money aside to pay back the APTC in full. They are supposed to call HC.gov to update their income if changes occur mid-year. Ultimately, it's the honor system. The law dictates that you "estimate" your future years' income, you can't be held liable for a truthful estimate. What's interesting.........is the CSR deductible reduction amount is not clawed back. The only penalty that may occur would be the underpayment of taxes. But, that's for an accountant to answer, or Ann.

Another quick question. When I was with a client today, I told her that if they make more than they estimate they would have to pay it back. She said was aware of that and if she made less she would get more money back. I told her I don't think it works that way but I would find out. True?

 

[bluediamond]

That supposedly is correct chazm, if she makes less than what she estimated she will receive what would have been her APTC.

 

[MBSC]

If actual income is less than the estimate, the additional APTC will appear on their tax return.

 

[Chazm]

That supposedly is correct chazm, if she makes less than what she estimated she will receive what would have been her APTC.

Ahh nice. Thanks guys