All about the Tax Credits...

June 16, 2015

 

Before I say anything else, let's get one thing out of the way:  I am not a tax advisor; in fact, I don't even do my own taxes.  

 

I will be explaining some general information on how the tax credits work and what the Washington Healthplanfinder does with them.  Please note that this is for Washington State, and we do not use Healthcare.gov, so your mileage may vary.

 

What is a Premium Tax Credit?

  • An amount of money available to low and middle income people to help pay for their health insurance premiums.

  • It can be applied to your monthly premiums throughout the year or claimed when you do your taxes for that year.

 

Where do you get the Premium Tax Credit?

  • You must buy your insurance through the Washington Healthplanfinder.

  • It is NOT available when you buy coverage directly from an insurance company.

 

Who can get a Premium Tax Credit?

 

This is probably the most confusing part of the whole process because there is not a simple answer.  There is a multi-step process to determine eligibility.

  1. You must first qualify via income.  If your household income is up to 400% of the Federal Poverty Level for your family size, congratulations, you are still in the running to get a Tax Credit. 

  2. Do you have access to health insurance through an Employer?  If so, you are disqualified from receiving Premium Tax Credits.  Bummer!  (There are exceptions if the coverage is deemed unaffordable).

  3. Your monthly insurance premium is then calculated for a baseline policy.

  4. If your calculated insurance premium is more than 9.56% of your monthly income you should receive a tax credit.

 

Why didn't I get a Tax Credit?

 

Many things can impact whether or not you get a tax credit, and here are some of them:

  • You make too much money (the threshhold isn't that high)

  • You are too young.  In other words, your premium is related to your age, and it may already be less that 9.56% of your income

  • You have access to employer group coverage (even if the cost for your spouse and kids is through the roof).  Yup, I know it's crazy.

  • You forgot to check the box to apply for the tax credit.

 

What do you do with your Premium Tax Credit?

 

Wouldn’t it be nice if you were handed a check?  Well, that’s not going to happen, but you do have a couple of options.

  • You can ‘ignore’ the tax credit, pay your full premium and have the tax credit apply when you do the current year's taxes next April.

  • You can have the whole tax credit apply to your monthly premium.

  • You can have a portion of your tax credit apply to your monthly premium.  If your income fluctuates, or you don’t like surprises, it may be wise to give yourself a buffer and not use the whole tax credit.  When your income goes up or you get a significant raise, the change will not have as big an impact on your bottom line.

 

Do You Have to Use the Tax Credit on a Specific Plan?

 

The short answer is no.  The tax credit is calculated based on a specific baseline plan (2nd cheapest Silver plan for you).  However, you can use the tax credit on any plan you are eligible for. Keep in mind that the dollar amount of your tax credit will remain the same, regardless of the plan you choose.  

 

 

How does expanded Medicaid work with the Tax Credits?

 

Washington was one of the states that chose to expand Medicaid, and there is a close relationship between the two systems.

  • If you qualify for Tax Credits you cannot be on Medicaid, and vice versa.

  • If you qualify for Medicaid but want to be on a regular Qualified Health Plan, you will have to pay the full premium for the plan – no tax credits will be given.

  • Eligibility is determined separately for each person in the family.  A parent may receive no tax credits since their employer offers them coverage, but their child may be on Medicaid since the family income is low enough.

 

How much is My Tax Credit?

 

The best way to calculate your tax credit is to apply on the Healthplanfinder website.  If you already have a tax credit, but your income has changed (+/- $150) you should report the change and have your tax credit recalculated.

 

If you are wondering what your tax credit would be, you can use this calculator to get an idea of what it would be.

 

 

Final Words

 

You guessed it - I want to repeat that I am not a tax advisor, and likely never will be.  I can help you with all things Healthplanfinder, but if you have specific questions about your tax situation, please consult your tax advisor.  

 

 

 

 

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