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Level 1

Obamacare subsidy pay back - income underestimation.

I am being charged the full amount of my ACA subsidy. I was on Obamacare from January 2017 - August 2017. My wife went from part time to full time at the end of summer, so she got employer benefits and we dropped our Obamacare coverage. Do I have to pay back the subsidy, even though we were not on Obamacare after the significant change in income occurred?

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Accepted Solutions
Level 7

Obamacare subsidy pay back - income underestimation.

If you notified healthcare.gov of your change of income and cancelled your benefits when your wife started receiving benefits, your PTC and Form 8962 should be calculating correctly. 

Does your 1095-A accurately reflect the months from January through August?  If not, you should contact healthcare.gov for a revised form.  Did you enter in TurboTax that employer coverage was only August through December?

There are limits on what you have to pay back. Here's some info on PTC you may find helpful:

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.f

Here's more info on the premium tax credit (PTC).

10 Replies
Level 12

Obamacare subsidy pay back - income underestimation.

The Premium Tax Credit ("subsidy") is based on your annual income, not just the months you had Marketplace insurance.  So if you annual income is higher than what you told the Marketplace, you will need to repay part (or all) of the Advance credit that you received.  Sorry, that is how Congress wrote the law.
Level 1

Obamacare subsidy pay back - income underestimation.

That's your Modified AGI, not annual income which ACA is base on.
Highlighted
Level 1

Obamacare subsidy pay back - income underestimation.

there is a cap on how much you have to repay though 1500.00
Level 1

Obamacare subsidy pay back - income underestimation.

there is not a cap I have to pay over $8000 back!
Level 12

Obamacare subsidy pay back - income underestimation.

The 'cap' is based on your income.  If you can get your income under 400% of the Federal Poverty Level (such as contributing to a Traditional IRA), it will trigger the 'cap'.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/i8962.pdf#page=16">https://www.irs.gov/pub/irs-pdf/i8962.pdf#page=16...>
Level 1

Obamacare subsidy pay back - income underestimation.

there is no cap my modified adjusted  income was $200 over the $48,240 cap and I have to pay back $11,400!!!
Level 12

Obamacare subsidy pay back - income underestimation.

@dwj827   As I said above, do you qualify to contribute to a Traditional IRA to trigger that cap?  The would dramatically reduce your repayment.
Level 1

Obamacare subsidy pay back - income underestimation.

I do not qualify because I am retired and I have no earned income. Nor do I qualify for an HSA because of the type of health insurance that I have. Thanks so much anyway for your suggestion.
Level 3

Obamacare subsidy pay back - income underestimation.

This 2017 chart seems different than what I've read and been told about 2018.  I had an unexpected inheritance that included $26,000 in capital gains income, which pushed my income above the 400% income max of $48,200.  I was told I must repay $6,500 in tax credits when I do my taxes.  But oh, this chart info,"fell between $48,500 and $72,750, you won't pay back more than $1,500" is for a family of 4. I'm a family of 1.  So if my income with the capital gains inheritance was $55,000+ I'll have to repay all my credits?  that's kinda horrifying for me, my "real" income is under $30,000 so I have to spend inheritance money to pay it back.
Level 7

Obamacare subsidy pay back - income underestimation.

If you notified healthcare.gov of your change of income and cancelled your benefits when your wife started receiving benefits, your PTC and Form 8962 should be calculating correctly. 

Does your 1095-A accurately reflect the months from January through August?  If not, you should contact healthcare.gov for a revised form.  Did you enter in TurboTax that employer coverage was only August through December?

There are limits on what you have to pay back. Here's some info on PTC you may find helpful:

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.f

Here's more info on the premium tax credit (PTC).