Premium Tax Credit - Partial Year

[BobbyK58]

Hello community. I signed up for Medicare in March 2023, for 2 months Jan-Feb had marketplace insurance with a premium credit due to very low income. Later in 2023 my income went up with retirement income received (when on Medicare). My taxes show a big repayment due although my income in Jan-Feb were very low. Can the repayment be based on monthly income or must it be for the whole calendar year?

[xmasbaby0]

When you transitioned from the insurance from healthcare.gov to Medicare---did you inform healthcare.gov that you no longer needed the insurance from them?

[xmasbaby0]

If you had health insurance from the marketplace, when you applied for the insurance, you gave healthcare.gov an estimate of how much income you would receive in 2023.  They used that amount to calculate how much of the insurance premium would be covered by the tax credit and how much would be your amount to pay.   So...you had some monthly amounts to pay, and the rest of the cost of having that insurance was paid by the government program.

If you ended up making a higher income than you told them you would receive, they re-calculate how much should have been paid by the program and how much should have been paid by you.   And if your own share of the cost should have been more, they get it back on your income tax return.   

If you actually had less income, you could even get some of the share you paid back on your tax return.

From Healthcare.gov:

If you're enrolled in a Marketplace plan and your income or household changes, update your application as soon as possible.

These changes — like higher or lower income, adding or losing household members, or getting offers of other health coverage — may affect the coverage or savings you’re eligible for.  After you finish applying or enrolling, you may be asked to submit documents to confirm your income.

Discover which changes to report.

Learn how to report changes.

[BobbyK58]

Yes I did, in my state health exchange

[DawnC · Accepted solution]

It is not based on monthly income, it is based on your total income for 2023 - as well as your zip code and family size.   You received a premium subsidy based on your situation early in the year.   Since you did not qualify for the discounts (based on your total income), those discounts are being paid back on your tax return.  

The Premium 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 to pay for coverage throughout the year rather than having to wait until you filed your 2023 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 2023 income would be, along with how many people your plan needed to cover and where you lived.

Now that you are reporting your actual 2023 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.   The discounts you received were based on your estimates when you enrolled.   If your actual situation turns out to be different from your estimates, you may need to re-pay premium tax credits that you did not qualify for.  

[BobbyK58]

Thank you for clarifying is based solely on annual income! I looked thru all the IRS material (Form 8962)

https://www.irs.gov/pub/irs-pdf/i8962.pdf