Premium Tax Credit Calculation

[Rick4136]

I was using ACA for healthcare coverage from Jan through April. I turned 65 in May and went on Medicare. I also started taking Social Security in  May. Even though I wasnt covered by the ACA from May onward, my income for the ENTIRE YEAR was used in the calculation. Is this correct? Did I miss something in the Turbo Tax software? Coverage ended at the same time the income increased. Doesnt seem right to be penalied for periods of low income after the fact. 

Thanks in advance.

[BrittanyS · Accepted solution]

The Premium Tax Credit calculation is based off the yearly income.  Changes in income can affect the credit so changes would need to be reported to Marketplace as soon as possible.  If you did not have Marketplace when the income changed then the amount affected by the change would be charged back when filing the return.  

For more information, see the link below:

- What is the Premium Tax Credit?

[Rick4136]

Thank you for the response.

Just so I am understanding the calculation/rules; the Premium Tax Credit calculation takes the entire year's income into consideration, regardless of the number of months the insurance policy was in place. So, even though the increase in income occured in the months AFTER the coveage terminated, the entire years income amount is used. Am I understanding this correctly?

Thanks again!

[BillM223 · Accepted solution]

Yes, you understand it correctly.

We were surprised to see this several years ago, but it's still true.