Health Care Tax Credit Subsidies

[hbcrac]

On the healthcare.gov tax credit subsidy, particularly in the state of Texas, if you had $0 income for 2023; do you have to return the subsidy when filing for the 2023 tax year federal taxes?

[MercieD1]

If you're referring to the tax credit on your individual return, that is calculated each year based on your income.  If you have $0 income in one year and high income the next, the subsidy will be paid pack when your file your return the next year.

[MercieD1]

How it works is that the subsidy is applied to your premium.  When you file your return the subsidy is reconciled using the form 1095-A.  If you're entitled to more, then you get a refund for the rest.  If you're entitled to less, you will have to pay it back on your tax return.

[hbcrac]

Thank you.  When you have $0 income; how would it be less entitlement of the tax credit? 

[MercieD1]

There are other questions that would be taken into consideration:

1. Were claimed as a dependent on someone else's return?
2. Did you have other non-taxable income (SSDI, non-taxable Social Security, Roth IRA distributions etc.)

According to the IRS:  In general, individuals and families may be eligible for the premium tax credit if their household income for the year is at least 100 percent but no more than 400 percent of the federal poverty line for their family size. For tax year 2021, if a taxpayer or the taxpayer’s spouse (if filing a joint return) received, or was approved to receive, unemployment compensation for any week beginning during 2021, the amount of the taxpayer’s household income is considered to be no greater than 133 percent of the federal poverty line for his or her family size and the taxpayer is considered to have met the household income requirements for being allowed a premium tax credit.

[MelanieCPA]

Hi @hbcrac 

I just want to add that when you  when you enrolled in a plan through the Health Insurance Marketplace -- your tax credit was based on the income estimate and household information you put on your Marketplace application.

You can use all, some, or none of your premium tax credit in advance to lower your monthly premium.

• If you use more advance payments of the tax credit than you qualify for based on your final yearly income, you must repay the difference when you file your federal income tax return.
• If you use less premium tax credit than you qualify for, you’ll get the difference as a refundable credit when you file your taxes.

When you file your annual tax return, you will report the information from your Form 1095A (you can find this tax form in your healthcare.gov account). 

It is a good idea to update your information in your healthcare portal if you have job/income/family composition changes during the year especially if you are using the credit to reduce premiums so there is not a significant difference at tax time.

Thank you! 

[MercieD1]

According to the IRS:

Household income below 100% of the federal poverty line.

If the amount on line 5 is less than 100%, you can take the PTC if you meet the requirements under Estimated household income at least 100% of the federal poverty line next or Alien lawfully present in the United States, later.

Estimated household income at least 100% of the federal poverty line.

You may qualify for the PTC if your household income is less than 100% of the federal poverty line and you meet all of the following requirements.

• No one can claim you as a dependent for the year.

• You or an individual in your tax family enrolled in a qualified health plan through a Marketplace.

• The Marketplace estimated at the time of enrollment that your household income would be at least 100% of the federal poverty line for your family size for 2022.

• APTC was paid for the coverage of one or more months during 2022.

• You otherwise qualify as an applicable taxpayer (except for the federal poverty line percentage).

So, if you signed up for Health insurance through the Marketplace when you had income of at least 100% of the Federal Poverty Level, you will be refunded any excess Tax Credit.

[MercieD1]

Keep in mind too, that if you have $0 income, you may be entitled to other programs.  You will have to check with your State to see what they have available.   See Healthcare.gov - options for individual with no income