Unfortunately the rules governing the calculations on Form 8972 do use annual income amounts.
You could consider making IRA contributions to lower your taxable income.
This new tax credit works differently than most. The premium tax credit was available immediately when you enrolled in a plan through the Marketplace. It worked like a discount so you could get help paying for coverage throughout the year rather than having to wait until you filed your 2017 taxes. Payments of the premium tax credit went directly to the insurance company to pay a share of the monthly health insurance premiums charged to you. The amount was calculated based on what you estimated your 2017 income would be, along with how many people your plan needed to cover and where you lived.
Now that you're reporting your actual 2017 income, ZIP code, and family size, we used this info to calculate the discount you should've received throughout the year, and made the necessary adjustment. You may get more of a credit (this happens if you made less money than you estimated when you applied) or have to pay some of it back (this happens if you made more money than you estimated when you applied), but there are limits on how much you have to pay back.
For example, if you're a single filer and your 2017 income...
- was less than $23,540 you won't pay back more than $300.
- fell between $23,540 and $35,310, you won't pay back more than $750.
- fell between $35,310 and $47,080, you won't pay back more than $1,275
- was more than $47,080, you will have to pay back all of any premium tax credit you received in advance.
If you're a family of four and your 2017 income...
- was less than $48,500, you won't pay back more than $600.
- fell between $48,500 and $72,750, you won't pay back more than $1,500.
- fell between $72,750 and $95,400, you won't pay back more than $2,550
- was more than $98,000, you will have to pay back all of any premium tax credit you received in advance.
Is there a way to lower the amount of tax credit I have to pay back?
If you're eligible to fund a traditional individual retirement account (IRA) and do so before April 15, the contributions you make may lower your income so that you do not have to pay back some (or all) of the advance tax credit you received.
Here's how: Making an IRA contribution will count toward your 2017 taxes and reduce your income, specifically your modified adjusted gross income (MAGI), which determines the actual premium tax credit you qualify for.
Depending on how much tax credit you received in advance, making a $1,000 contribution to a traditional IRA could result in a tax savings of several times more than that because of caps on repayment that are in place for different income thresholds.
Here's an example:
Jessica is married and bought a health insurance plan through her state Marketplace in January of 2017. She qualified for a premium tax credit when she signed up based on what she estimated her 2017 income would be. When she does her 2017 taxes with TurboTax, her income is calculated to be $64,021 for 2017. After she enters the details of her 1095-A, she finds out that her income is above the threshold to receive the premium tax credit. This means she has to pay back all of the tax credit she received in advance as a discount on her health insurance premiums during the year. She decides to contribute a $1,000 to a traditional IRA. This lowers her income to $63,021 and puts her below the threshold needed to qualify for the tax credit and within a repayment cap, which lowers the amount she has to pay back.
Here's how to check if you're eligible to fund a traditional IRA:
1. Go to Federal Taxes, then Deductions & Credits
2. Select "I'll choose what I work on"
3. Scroll down to Retirement and Investments and start Traditional and Roth IRA Contributions.
4. Check the person who wants to contribute to a traditional IRA.
5. Select Yes when asked if you contributed to a traditional IRA.
6. Answer the question about Repayment of a Retirement Distribution.
7. Enter an amount to contribute and select Continue.
8. Go back to Health Insurance and continue until you reach the screen that says "Based on your info..." and check if the IRA contribution lowered your income enough to lower the premium tax credit amount you have to pay back.
