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ACA premium subsidy & tax return
Old 01-07-2014, 07:17 PM   #1
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ACA premium subsidy & tax return

I am trying to understand this, "If the amount of advance credit payments you get for the year is less than the tax credit you're due, you’ll get the difference as a refundable credit when you file your federal income tax return."

So if I shop outside the marketplace, and pay the entire policy premium from my pocket first, i.e, the advance credit payments I get is ZERO, then if I am due for the premium subsidy, I should get the premium subsidy as the tax credit when I file the federal tax return, right?

If this is the case, why do I need to shop through the marketplace? I can simply buy the policy directly from the insurer, and get the premium subsidy back when I file the tax return.
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Old 01-07-2014, 07:38 PM   #2
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You can shop through a qualified broker or on-line broker like ehealthinsurance.com (they may not have their software up and running yet) and still receive the subsidy. If you shop through the exchange, you may choose to get your subsidy at the end of the year as a tax refund or have it sent directly to the insurance company on a monthly basis so that you are only responsible for paying the balance. If you qualify for a subsidy, you will receive it whether or not you have taxable income.
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Old 01-07-2014, 07:56 PM   #3
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So, contrary to the popular belief that the only way to get premium subsidy is through the marketplace, you can actually get the premium subsidy anyway you shop for the policy, as long as you agree to pay the entire premium upfront and get the subsidy back later as the tax credit, is this true?

Then the only advantage to shop through the marketplace is to get the cost sharing subsidy, because you will not be able to get the cost sharing subsidy if you shop through a portal or the insurer's website, correct?
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Old 01-07-2014, 08:03 PM   #4
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What if you do NOT buy any policy and just pay for the penalty, will you get the premium subsidy as the refundable tax credit when filing the tax return?
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Old 01-07-2014, 08:05 PM   #5
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No, you have to shop with qualified brokers to get your tax credit subsidy. Ehealthinsurance.com is one of the qualified brokers.

Yes, you have to shop through the exchange to get the cost sharing part of the subsidy, as far as I know.

There are no actual security concerns about the exchange, if that is a problem for you. My congressman released a heavily edited memo (aka "a lie") to ABC news and they published it. They retracted the story the following day, but another TV network is still making the claim that there is a security issue with the federal exchanges. In reality, you submit no health information, other than smoking status, to any state or federal exchange. The federal government already has your SSN and tax info....
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Old 01-07-2014, 08:10 PM   #6
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why do I have to shop through qualified brokers? Can I just buy a policy however the way I want, and then get the premium subsidy as the tax credit? Of course I need to pay the entire premium out-of my own pocket first.

What if I do NOT buy any policy, can I still get the premium subsidy as the tax credit?


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No, you have to shop with qualified brokers to get your tax credit subsidy. Ehealthinsurance.com is one of the qualified brokers.
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Old 01-07-2014, 08:36 PM   #7
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Here's an article about purchasing off the exchange:
http://www.nytimes.com/2013/10/26/yo...exchanges.html

No, you can't get a tax credit for buying something that you didn't buy.

Don't shoot yourself in the foot. Take a look at the exchange before you decide what you are going to do.
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Old 01-07-2014, 09:36 PM   #8
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Originally Posted by AllDone View Post
No, you have to shop with qualified brokers to get your tax credit subsidy. Ehealthinsurance.com is one of the qualified brokers.

Yes, you have to shop through the exchange to get the cost sharing part of the subsidy, as far as I know.

There are no actual security concerns about the exchange, if that is a problem for you. My congressman released a heavily edited memo (aka "a lie") to ABC news and they published it. They retracted the story the following day, but another TV network is still making the claim that there is a security issue with the federal exchanges. In reality, you submit no health information, other than smoking status, to any state or federal exchange. The federal government already has your SSN and tax info....

The issue isn't that government has additional information about you. The issue is that a hacker could can gain access to healthcare.gov and obtain peoples names, birthdays, SSN, address and other personal information. That information is all vital for someone attempting identity theft. Given that we have weekly news reports of hacker getting credit care info.

The poor quality of the government website code is certainly sufficient to make me concerned about the security of the website. If my credit card info gets stolen from Target or whoever, I have the inconvenience of getting a new credit card. I am always very careful about providing both of my SSN and birth date online, and routinely lie about my birthday. Identity is whole lot more scary than getting my credit card info ripped off.
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Old 01-15-2014, 12:08 PM   #9
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Originally Posted by ipotrader View Post
why do I have to shop through qualified brokers? Can I just buy a policy however the way I want, and then get the premium subsidy as the tax credit? Of course I need to pay the entire premium out-of my own pocket first.

What if I do NOT buy any policy, can I still get the premium subsidy as the tax credit?
Here's what the IRS says in their Questions and Answers page (Questions and Answers on the Premium Tax Credit) on the ACA tax credit:

5. Who is eligible for the premium tax credit?

You are eligible for the premium tax credit if you meet all of the following requirements:
  • Purchase coverage through the Marketplace. [emphasis added]
  • Have household income that falls within a certain range (see question 6).
  • Are not able to get affordable coverage through an eligible employer plan that provides minimum value (see questions 8 and 9).
  • Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.
  • File a joint return, if married.
  • Cannot be claimed as a dependent by another person.
I assume that when you file your tax return next year, if you claim the premium tax credit the IRS will check your claim against the enrollment data from healthcare.gov or your state's exchange. If you do not show up in the database, you will not get the credit.
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Old 01-22-2014, 01:47 PM   #10
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DW and I have looked at the idea of living off cash and possibly the sale of our home for the first few years of retirement (1/1/2017 retirement date). We'd like to delay withdrawals from our 401k's and IRA's as much as possible, and wait on SS until 2021/2022 (age 66 for each of us, respectively). Am I correct in assuming that this would put us in a very low income bracket (int and divs only?) and qualify easily for the ACA subsidy?
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Old 01-22-2014, 02:30 PM   #11
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DW and I have looked at the idea of living off cash and possibly the sale of our home for the first few years of retirement (1/1/2017 retirement date). We'd like to delay withdrawals from our 401k's and IRA's as much as possible, and wait on SS until 2021/2022 (age 66 for each of us, respectively). Am I correct in assuming that this would put us in a very low income bracket (int and divs only?) and qualify easily for the ACA subsidy?
Yes, but if your income goes too low, you don't qualify for the ACA subsidy. I.e. your supposed to be on medicaid. You can do partial ROTH conversions to push your income up high enough to qualify.

ETA: 2017 is a long way off. All kinds of things could change by then.

ETA2: http://www.valuepenguin.com/understanding-aca-subsidies gives a quick overview of subsidies by state for now. It can be fun to play with.
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Old 01-22-2014, 02:34 PM   #12
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Quote:
Originally Posted by teekaymn View Post
DW and I have looked at the idea of living off cash and possibly the sale of our home for the first few years of retirement (1/1/2017 retirement date). We'd like to delay withdrawals from our 401k's and IRA's as much as possible, and wait on SS until 2021/2022 (age 66 for each of us, respectively). Am I correct in assuming that this would put us in a very low income bracket (int and divs only?) and qualify easily for the ACA subsidy?
This is exactly what we are doing. I have a small income part time job, but otherwise we are living off savings. Once we start withdrawing from retirement accounts in 2016, we will not qualify for subsidies. Even so, coverage is cheaper and better from what we had.
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