Learn how advanced premium tax credits work.
The most common Obamacare subsidies for families or individuals include advanced premium credits, or APTC. The IRS refers to these tax credits as advanced because qualified people can take them in advance of filing their taxes to help pay their premiums during the year.
The Affordable Care Act intended to offer these Obamacare subsidies to help people and families with modest incomes and no access to employer-based health plans to afford health insurance payments. Out of about nine million people who had enrolled, most did receive a subsidy. For the last year with finalized numbers, 2017, the Kaiser Family Foundation said that monthly premium credits averaged $371, but some states had lower or higher averages.
How advanced premium credits work
The government bases advanced premium credits upon family income and size. To qualify, applicants typically can’t have access to employer health plans and must earn from 100 to 400 percent of the current poverty level published by the government.
- In 2018, an individual may qualify for these Obamacare subsidies if they earn between $12,140 and $48,560.
- A family of four could earn between $25,100 and $100,400.
If some family members can enroll in group health insurance through work but some family members cannot, only those people without group coverage will qualify for these Obamacare subsidies.
How to estimate Obamacare subsidies
In any case, nobody needs to calculate their subsidy by hand. The application for ACA health insurance will include some questions that will allow the system to calculate Obamacare subsidies before the applicant selects a health plan. Quotes for Obamacare insurance from eHealth will supply estimates of advanced premium credits, and when you enroll in your plan, we will work with the government Marketplace to get you your subsidy.
Calculations through eHealth or a government website will use an estimate of modified adjusted gross income. Many people base their estimates upon a previous year’s earnings. Some families cannot exactly estimate their income for the next year. If a family’s final income is less than their estimate, they may get a refund; however, if a family’s income is more than they initially estimated, they may have to pay back the excess in advanced premium credits.
Estimating income for Obamacare subsidies
The government calculates Obamacare subsidies as a percentage of estimated income. As income increases, the percentage drops. When income rises over 400 percent of the poverty level, applicants won’t qualify for an APTC at all. Sometimes, just a one-percent change in income can make a big difference in the amount of premiums a family would have to pay. In a previous overview, eHealth warned consumers about falling off the “Obamacare Subsidy Cliff” unexpectedly.
If a family has greatly underestimated their income, they could face higher tax bills than they planned because they will have to pay back the excess advanced premium credits. Some people earn irregular incomes or get unexpected raises or bonuses during the year, so they may have trouble estimating their income for the next twelve months. While these consumers may enjoy higher Obamacare subsidies with a lower income, they should also take care not to underestimate their income too much.
Decreasing modified adjusted gross income
The IRS uses a figure called the modified adjusted gross income to calculate the APTC. Taxpayers who anticipate earning more income than they estimated might take some measures to lower this amount to eliminate or reduce the amount of tax credits that they would have to repay:
- Donate to a qualified charity in order to take a deduction that will lower taxable income.
- Taxpayers may also get deductions for contributions to health savings accounts or individual retirement accounts.
- Speak with a tax professional about ways to minimize taxes.
Also, even though consumers can take Obamacare subsidies in advance, they don’t have to. People with unpredictable incomes in the higher ranges might decide that they would rather just pay their entire premium during the year and wait to collect a refund until after they have filed taxes.
How to find health insurance with Obamacare subsidies
To enjoy the widest selection of health insurance plans with Obamacare subsidies, start an Obamacare health insurance quote on eHealth. This fast and accurate quote system can also calculate tax credits and other subsidies, so you will understand what you need to pay. In addition to individual and family plans that qualify for advanced premium credits, eHealth also offers quotes for Obamacare small business health insurance. You can also use eHealth to find non-Obamacare plans and other health benefits.