Do I have to include as income the Health Insurance Premium Rebate received from my plan under the Affordable Care Act?

[BillM223]

By "Health Insurance Premium Rebate", do you mean the amount that the Marketplace sends to the insurance company to help pay your insurance premiums?

If so, then no.

This is described as the Premium Tax Credit, and if you were allowed that amount (this is not known until the end of the year when you do your return), then it is not reported as income. However, if you were given too much, it is taken out of your refund.

[zllovet]

Not exactly. I am referring to the health plan premiums rebate check sent to members of the health plan (me) by the health plan. This pursuant to the Affordable Care Act (Obama Care) which requires Health Plans annually "to issue a rebate to you if the [health plan] does not spend at least 80% of the premiums it receives on health care services..." for the member. (The ratio varies per state).  

[zllovet]

In expanding to my previous reply and in order to make myself more clear, the ACA refers to this as the Medical Loss Ratio which varies per state. In ME the health plan must rebate to the member 4.30% of premiums it received under the ACA. In my case, it was $477.53.  My intuition is that since all the amount received in premiums under the ACA is considered for tax purposes when filing my taxes as per the 1095-A Form as a  "Monthly advance payment of premium tax credit", I am already paying for it. But, I am not a tax expert; I'm only guessing. 

I'll really appreciate it if you clarify your response. 

Thanks!

[DawnC]

You do not have to include it as income on your tax return as long as you did not take an itemized deduction for the premiums on last year's return.   The rebate represents an adjustment of your Marketplace plan premiums.  Please see the last question of the IRS Q&A on Medical Loss Ratio rebates.   

The Treasury Department and the IRS are considering the issuance of guidance applicable to future tax years that will address whether a taxpayer must increase his or her tax liability for the year of the receipt of the MLR rebate to the extent the taxpayer was allowed a premium tax credit for the portion of the taxpayer’s prior-year premium that was refunded.   As of now, however, the rebate does not need to be included unless the premiums were deducted on Schedule A.  

[EML1]

So, if I itemized deductions including health insurance premiums in 2020, I must include the $2600 I received as medical loss ratio as income on my 2021 taxes?  What line do I add them and what do I call it?  Thank you.

[GeorgeM777]

Because it appears that you deducted the premium payments on Schedule A of your 2020 Form 1040, the MLR rebate that you received in 2021, is taxable to the extent that you received a tax benefit from the deduction, whether the rebate is received as a cash payment or applied as a reduction in the amount of premiums due for 2021.  As such, you should report this income as a taxable refund on Schedule 1, line 1.  Your Schedule 1, line 1 entry will transfer to your Form 1040, line 10.

Follow these steps to enter your taxable MLR into TurboTax.

Under Wages & Income, scroll down to the section, Less Common Income.  The last item on that list is Miscellaneous Income, select it.

1. On the next screen, select Reimbursed deductions from prior year.
2. Answer the questions that appear on the pages that follow.

[lustrous]

The interview you directed to does not have a selection for reimbursement of premiums.  The choices are only:

-Medical Expenses

-Refunded Taxes

-Moving Expenses

-Casualty of Theft Loss

-Employee Business Expenses

-Other Itemized Deductions

-None of The Above

...selecting None of The Above exits that portion of the interview.

Where should these amounts be entered?

[Vanessa A]

If you are itemizing and claiming the health insurance as an itemized expense, you can simple enter them net of the reimbursement meaning deduct the reimbursement from the premiums paid, then enter that amount.  

If you are not itemizing, then there is no need to enter these reimbursements as they are not taxable income. 

[erwinturner]

I see that the answer to this question was written in 2021. Is the answer true for 2024 tax year?

[Mike9241]

if you itemized deductions and took a deduction for those premiums to the extent you received a benefit from the deduction the refund is taxable.

in the case of itemized deductions, the taxable amount will generally be the lesser of the refund or line 4 of schedule A for the year of the deduction

if you took a self-employed health insurance deduction for the premiums the refund is taxable to the extent of the lesser of the SE health insurance deduction or the refund