ACA Premiums Rebate, filing personal taxes

[CDRE]

The ACA requires insurance companies to provide rebates in September each year according to the Medical Loss Ration 80/20 rule. Billions are refunded each year, according to this link: https://www.healthinsurance.org/obamacare/billions-in-aca-rebates-show-80-20-rules-impact/ The rebates are for the prior year's premiums. So in September of 2022, I received a rebate towards the premiums I paid in 2021 and those premiums were reduced based upon projected income for 2021.

Now the Question: How is this yearly rebate incorporated/disclosed when filing household taxes (if at all)? Looking at following link's Section E which is Example Q/A #15, it seems that the person does nothing because the IRS & Treasury Department have not made a decision: https://www.irs.gov/newsroom/medical-loss-ratio-mlr-faqs Also, my head hurts from reading and trying to find the answer in https://www.irs.gov/publications/p525


Thoughts and suggestions are appreciated.

 

[Spock]

I treat it like the credit card cash back rebates received when I use the card to pay the insurance premiums and med bills.

 

[FIREd_2015]

deleted.

 

[CDRE]

For another similar scenario, what about if you received a Rebate and are claiming the premiums as an itemized medical deduction (over the 7.5% of AGI threshold)? Does that trigger incorporating the Rebate when filing taxes or because it is from a prior year, it does not get incorporated? I hate taxes!!

 

[cathy63]

For another similar scenario, what about if you received a Rebate and are claiming the premiums as an itemized medical deduction (over the 7.5% of AGI threshold)? Does that trigger incorporating the Rebate when filing taxes or because it is from a prior year, it does not get incorporated? I hate taxes!!

In this case, the rebate is taxable in 2022 to the extent that you benefited from it in 2021.

Recalculate your Schedule A from 2021 after subtracting the rebate from the premium deduction you took last year. Then compare line 17 from the old and new Sched As. The difference is taxable income for 2022.

This gets more complex if the recalculated Sched A deductions are lower than the standard deduction; or if you had QBI that was limited; or if you had zero tax liability with unused non-refundable credits; or a few other uncommon cases.

 

[CDRE]

In this case, the rebate is taxable in 2022 to the extent that you benefited from it in 2021.

Recalculate your Schedule A from 2021 after subtracting the rebate from the premium deduction you took last year. Then compare line 17 from the old and new Sched As. The difference is taxable income for 2022.

This gets more complex if the recalculated Sched A deductions are lower than the standard deduction; or if you had QBI that was limited; or if you had zero tax liability with unused non-refundable credits; or a few other uncommon cases.

Thanks for the insight. That's fairly straightforward.