Although April 15 seems a long way off, decisions people make about health coverage can have have big tax implications.
I understand that different members of a family can buy different marketplace plans. How does that work with premium tax credits for a husband and wife? How do they get divvied up, and how do we report that to the IRS?
If a married couple files their taxes jointly and their income is less than 400 percent of the federal poverty level, ($62,040 for a couple that enrolled for 2014) they were likely eligible for premium tax credits. The premium subsidy they received would have been based on the amounts they were expected to pay for health insurance based on their income compared to the cost of the “benchmark” plan in their area. This benchmark plan is the second-lowest cost silver plan.
A couple can then allocate that subsidy between themselves however they wish, says Judith Solomon, a vice president for tax policy at the Center on Budget and Policy Priorities.
By the end of January 2015, everyone who received a premium tax credit in 2014 should receive a form from the health insurance marketplace that says how much credit they received. Then they should they should add up the totals and report that information on IRS Form 8962.
What happens to someone who has overestimated his income and received the wrong subsidy amount for a marketplace plan? Does he get a tax refund when he files? What if he underestimated his income and was paid too much? Does the system catch it when he reapplies for coverage in 2015? Will he be prevented from renewing automatically?
If you received too small a subsidy because you overestimated your income, that amount will be added to your tax refund — if you’re receiving one — or it will reduce the amount of tax that you owe, says Timothy Jost, a law professor at Washington and Lee University and an expert on the health law.
Similarly, if your subsidy was too large because you underestimated your income, you may have to pay some or all of
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