ACA Subsidy question

[MikeinMD]

I think I know the answer but can't seem to find much info on it. I have medical insurance through the state run ACA site. If I don't apply for the monthly ACA subsidy and my income is below the ACA subsidy threshold I believe I will get a tax credit back when I fill out form 8962 on the 1040 next year. Is this correct? I'd like to do this to make my income more flexible.

[Which Roger]

I'm pretty certain that the answer is yes, although others may chime in with some caveats and gotchas. If you can afford the payments, this seems to be a good way to go in the first year of ER, when you have a big income drop. Avoids having to jump through all the hoops to provide convincing documentation about the income change.


Which brings to mind a related question: During the application process, when it asks about income, is there an option to just skip that part, or do you have to provide income information even if you have no intention of getting the subsidies?

[Spock]

Depends on what you mean by "income is below the ACA subsidy threshold" and what state you live in.. if your income is below the ACA threshold there is no subsidy, just Medicaid.

[scrabbler1]

The first 2 years I had an ACA policy (2014 and 2015), I was unable to receive an advance ACA subsidy via a premium reduction. This was because my state (a state-run website) at the time wasn't able to understand how I could be eligible for one even though all of my income was investment income and under the threshold. When I completed Form 8962, I was able to take the full calculated subsidy as a tax credit.


But when I changed insurance companies starting in 2016, they were somehow able to apply my subsidy as an advance premium credit. When tax time came around, only the difference between the advance premium credit and the calculated subsidy was available to use as a tax credit. A few years, the advanced premium credit was greater than the calculated subsidy, so I had to give a few dollars back. And in 2017 (and for 2018, I already know), I will go over the so-called ACA subsidy cliff where I will have to return the entire amount of the subsidy as part of my April tax payment. For 2019, I won't even get any advanced premium subsidy, so I will be back where I was in 2014 and 2015 if I happen to avoid the cliff next year.

[Dtail]

Do you mean that your income is below 4x FPL and thus qualify for the ACA subsidy, but you wish to not take it upfront and instead you wish to get the subsidy back at tax time?

[Which Roger]

Quote:

Originally Posted by Dtail Do you mean that your income is below 4x FPL and thus qualify for the ACA subsidy, but you wish to not take it upfront and instead you wish to get the subsidy back at tax time?

I'm not the OP, but I had the same follow up question, and I'm pretty sure this is what OP is asking.

[MikeinMD]

Right, I meant income below 4x FPL and above Medicaid. I had income subsidies last year, although providing income verification documentation was a hassle. For this year I must have clicked on "Do not require subsidy" option on the ACA website. Although I do not remember doing this, the ACA operator said that's what happened. After thinking about it I thought I like the idea of not getting them during the year as long as the tax credits are applied when filling in the 1040. It sounds like that's what will happen.

[Which Roger]

Quote:

Originally Posted by MikeinMD Right, I meant income below 4x FPL and above Medicaid. I had income subsidies last year, although providing income verification documentation was a hassle. For this year I must have clicked on "Do not require subsidy" option on the ACA website. Although I do not remember doing this, the ACA operator said that's what happened. After thinking about it I thought I like the idea of not getting them during the year as long as the tax credits are applied when filling in the 1040. It sounds like that's what will happen.

You may have answered the second part of my follow-up question. Clicking the "do not require" button bypasses all of the income questions and need to verify income, correct?



Someone I know had 6-figure income last year, but just ERd and will have much, much less this year. She has started down the path of providing the requested documentation to explain the big drop in income, but also indicated that she is willing to forego the subsidy and just settle up at tax time if that becomes too painful.

[MikeinMD]

I'm not sure about all state's requirements, in Maryland I had the option of bypassing subsidies this year. If I want to reinstate the subsidies I would have to provide income verification which in the past I had a difficult time providing. I do not know if no income verification is required if you do not want subsidies for all cases.

[Texas Proud]

Quote:

Originally Posted by MikeinMD Right, I meant income below 4x FPL and above Medicaid. I had income subsidies last year, although providing income verification documentation was a hassle. For this year I must have clicked on "Do not require subsidy" option on the ACA website. Although I do not remember doing this, the ACA operator said that's what happened. After thinking about it I thought I like the idea of not getting them during the year as long as the tax credits are applied when filling in the 1040. It sounds like that's what will happen.

The answer is yes, you will get it as a tax refund...


I did this for the first two years and paid my premiums with a cash back CC so I also got a good amount from that... close to $80 the first year and more the second..


I now have lowered my income to get the reduced copays etc. since silver plans went way up in price and I get a really good subsidy...

[Smitty700]

Another thing to keep in mind is that if your income is low enough to be eligible for Cost Sharing Reductions (CSR), you cannot get those if you wait to take the subsidies on your 1040.

[MikeinMD]

I have to admit I hadn't heard of the CSR savings, it appears to be associated only with the silver plan. I've been getting the bronze plan since so far I've been fairly healthy although I can see why the silver plan would make sense.

[Smitty700]

Quote:

Originally Posted by MikeinMD I have to admit I hadn't heard of the CSR savings, it appears to be associated only with the silver plan. I've been getting the bronze plan since so far I've been fairly healthy although I can see why the silver plan would make sense.

The silver plans can make more sense when one is eligible for CSR. Those silver plans with CSR, even with a higher monthly premium, can make sense for the very low deductibles that the CSR provides (as low as $100 per person).

[Dtail]

In general the sweet spot for a Silver plan with CSR savings is limiting your MAGI to no more than 1.5x FPL.

[gauss]

As long as you purchase your ACA plan on the Marketplace (ie. the State run one or the Federal run one if you state doesn't have their own exchange) and you meet all the other requirements, (which are listed on IRS Form 8962 and its instructions) then you should receive your subsidy (aka PTC) when you fill out your taxes the following year.

There is no need to take it upfront (aka APTC) by having the subsidy sent directly to the insurance company.

Just don't buy the policy 'off-exchange' as this would disqualify you for the subsidy.

-gauss

[Texas Proud]

Quote:

Originally Posted by Smitty700 The silver plans can make more sense when one is eligible for CSR. Those silver plans with CSR, even with a higher monthly premium, can make sense for the very low deductibles that the CSR provides (as low as $100 per person).

Not only the lower deductible, but the lower copay....


I pay $10 for Dr and $30 for specialist... the bronze plan was $50 and $75...


I go 2 to 4 times a year... DW once and DD once... this past year we went more... maybe 10 to 15 times @$40 per pop is $400 to $600 savings.. OH, also went to a specialist a couple of times...


With the CSR not being paid by the gvmt anymore the second silver went up and the ACA credit went up... now for me most bronze would be $0 and I would lose credit... so the silver with CSR is so much more affordable and is much better for me...


Now, I might regret it in 10 years when I start SS and tIRA distributions... but I hope to lower that problem between 65 and 70....

[GTFan]

Quote:

Originally Posted by Dtail In general the sweet spot for a Silver plan with CSR savings is limiting your MAGI to no more than 1.5x FPL.

Still pretty good if you go up to 2x here which is a little over $32k for us right now. 87% of costs covered is not bad. Above that number is where the benefit falls off a lot.

[sengsational]

Quote:

Originally Posted by Dtail In general the sweet spot for a Silver plan with CSR savings is limiting your MAGI to no more than 1.5x FPL.

And of course the cost sharing has zero value if you don't have expenses that take advantage of the low co-pays. Having generally low health services utilization, the higher premiums for Silver never made sense for us. But I'm glad people use them because high Silver premiums mean the PTC is enough to cover the entire Bronze plan.

[Dtail]

Quote:

Originally Posted by sengsational And of course the cost sharing has zero value if you don't have expenses that take advantage of the low co-pays. Having generally low health services utilization, the higher premiums for Silver never made sense for us. But I'm glad people use them because high Silver premiums mean the PTC is enough to cover the entire Bronze plan.

Agree.
Of course it matters where one lives. My premium for 2019 using an effective Head of Household designation at 24k MAGI is $64 monthly with In network deductible of $0.