During tax season this year, many folks experienced some form of “sticker shock” when they realized their actual premium tax credit was quite a bit different than what was estimated when they applied for their 2015 health coverage through the Affordable Care Act (ACA) Marketplace. Some people owed more money than they expected and others received a greater refund.
To avoid this happening again next tax season, here’s what you should do whenever your income or family size changes during 2016.
When you apply for assistance with your health insurance premiums through the ACA Marketplace, the Marketplace estimates the amount of your premium tax credit. If you request to receive advance payments on your premium tax credit to be used to reduce your monthly health insurance premium, you will be required to reconcile what you received throughout the year with what you should have received based on your actual income.
If your income is greater than what you estimated or your family size is smaller, you will have to repay some or all of the premium tax credit you received. If your income is less than what you estimated or your family size is greater, you will receive a larger refund because you will be eligible for a greater premium tax credit than what you already received.
To avoid the unpleasant surprise of owing more tax than you expected, pay attention to how your actual income during the year compares to what you estimated when you applied through the Marketplace. If your income or your family size has changed, take advantage of the Premium Tax Credit Change Estimator to see if your premium tax credit will change: http://www.taxpayeradvocate.irs.gov/estimator/premiumtaxcreditchange/.
If the estimator indicates your premium tax credit will be different than what was estimated when you applied, return to the Marketplace to update your estimated income. If you aren’t sure how to contact the Marketplace, go to https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/The-Health-Insurance-Marketplace.
Have questions or need more information? Contact us at 402-502-0250 or [email protected]. You can also find more information here: https://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Premium-Tax-Credit:-Claiming-the-Credit-and-Reconciling-Advance-Credit-Payments.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.
