Affordable care act

[badgirl]

When I applied for the ACA credit, I didnt know I would be getting married in June.  Nor did i know that my dependent son who graduated in May 2019 would have a job.  I got married in June and my son got a job starting in September  so he was no longer a dependent beginning in September.  He was a total dependent January through August (actually through September because I had to fund him until he got paid.) I stopped the ACA in August.  I.E. I only got it January 1 through 8/31.  When using TT, it says I have to pay all of the premium tax credit back.  I would have thought I would have to pay the credit back for July and August.

[BillM223]

@badgirl

The calculation is considerably more complicated than that.

Really, the amount of the PTC (Premium Tax Credit) that you have to pay back depends on (1) the amount of income you estimated at the beginning of the year when you applied for the ACA insurance, and (2) the total amount of income that your tax family actually received at the end of the year.

This is described on form 8962.

Note that this calculation is on an annual basis, not month by month (even though it looks like it is). That is, if your income turned out to be too high at the end of the year, you have to pay back all the PTC, even if you might think that you deserved it for part of the year.

It is very confusing for taxpayers, in part, because the ACA, as you will recall, was hurriedly thrown together several years ago, and the changes since have not been trying to actually make it better. 

[badgirl]

I actually made exactly the money I said I would, but my son got a job in September he is no longer a dependent, and my family size show as 1, married filing separate

[BillM223]

Thanks for the update.

It is difficult to address this without all the information from your return (which, of course, we cannot see here on the Community).

But at the beginning of the year, there was an estimate made based on a family size of 2, This drives the household income as a percentage of federal poverty line (line 5 on the 8962). Your PTC amount is dependent on the size of this value.

Note that line 4 (Federal poverty line) depends on the size of your family.

If you reduced your family size by the end of the year, then the percentage on line 5 almost certainly increased, likely to beyond 401%, which would disallow any PTC.

Again, this calculation is based on your ANNUAL information, not monthly. It does not seem fair, but if you read the instructions for form 8962 carefully, you will realize that this is the case.

The same thing catches taxpayers who start off with low income (and estimate for the ACA), but got a great job halfway through the year and end up making a lot of money. Even though you would think they would get to keep to PTC from the first half of the year, they can't.

On your 8962, is line 5 401% or more?

[AmeliesUncle]

Just to clarify one thing that Bill said ... it is based on your ANNUAL income on the TAX RETURN.  So because you are presumably filing a Joint tax return, it is based on your JOINT income.

There is a provision that can lower the repayment in the year of marriage (be sure to check that box), but in most cases that I've seen, that "alternative" calculation does not save any money.