Repayment of Excess Advance Premium Tax Credit

[cottagecharm11]

We estimated our income for the 2022 Tax Year for Marketplace Insurance for my husband. Months later we decided to sell a rental, which closed on 07/27/22. This caused a very large increase to our income from the capital gain. I notified our insurance agent who signed my husband up for the policy about the change in income a few weeks after closing, in August, just as we were told to do if we had an increase of income. We ended up canceling the insurance policy on 09/01/2022 because the cost to us was going to go up to over $1100 per month, with a $7,000 deductible and a 40% copay, for the remaining 4 months of 2022.

Our agent said not to worry about owing any repayment of premium, she assured us that it is based on the income from before we canceled, but that is not what is happening.

During the interview Turbo Tax never asked about health insurance or supplied a Form 1095-A. I  did a search for the form and when it came up I manually entered my husbands Marketplace Assigned Policy Number and filled out the form manually, this automatically generated Form 8962 with a repayment for the entire premium in the amount of $6288. Was my insurance agent wrong about not owing this repayment? 

[MaryK4 · Accepted solution]

Unfortunately, your insurance agent was wrong.  The income is based on the entire year- this has always been a problem with Obamacare.  

The amount of your excess APTC that increases your tax liability may be limited if your household income is less than 400 percent of the applicable federal poverty line, but you will have to repay all of the excess APTC if your household income is 400 percent or more of the applicable federal poverty line.

[RROBINSON123]

So, if you got a job during the year, terminated MarketPlace coverage as instructed, your payback will be based on your annual income including that earned from the job after terminated? That doesn't sound right!?!?!?

[DMarkM1]

Reconciling the Advanced Premium Tax Credit is based on annual income (entire year) for the year the subsidy was received. If the taxpayer's annual income as reported on the federal tax return ended up being above 400% of the federal poverty level based on household size then any advanced premium tax credit would need to be repaid.  Here is a Marketplace link for reference.