ACA Cliff 2021 Question

[joesxm3]

I have seen mention of the ACA "cliff" not being applicable to the year 2021. Would someone please explain what that means?

I have a general idea that there was some amount of AGI that completely disqualified you from ACA subsidies, but I am not clear on what the effect is on an AGI that is less than that but more than you estimated.

First, I would like to make sure that we are talking about current income and the tax return that will be filed in a few months.

Second, if I have more income than the $40,000 that I estimated, will I still have to pay back some of my premium reductions like usual, or did this elimination of the cliff also eliminate the need to pay back the subsidies if you went over the estimated amount?

Thanks.

Joe

 

[SecondCor521]

Normally (ie any other year besides 2021/2022):

The "cliff" is at 400% of FPL for your family size. If your ACA MAGI is $1 below 400% of FPL, then you get ACA subsidies. If your ACA MAGI is $1 above 400% of FPL, then you get zero subsidies (and would have to pay back 100% of any subsidies you received).

If your estimate is, say, 350% of FPL and you end up higher but still below 400%, then you'd have to pay back the appropriate proportion of your subsidies, but the repayment would be capped (I think it's capped at $2600, but not sure offhand).

Yes, the elimination of the cliff is applicable to 2021 and 2022, and is for the income tax returns you'll file in about spring of 2022 and spring of 2023.

The elimination of the cliff did not eliminate the need to pay back subsidies if your actual income is higher than your estimated income.

The elimination of the cliff means that people who are above 400% of FPL are eligible for some subsidy (their cost of insurance is limited to 8.5% of AGI). I think what happens if they're above 400% on their estimate, they can get a subsidy just like you, and if they're above 400% on their actual and their estimate was higher than their actual, they'd just have to pay back whatever excess they had received - probably subject to no limitation, but I'm not 100% sure about that point.