How to Get a Subsidy to Pay for Health Insurance
The clock is ticking toward the deadline of March 31, 2014, when most uninsured Americans will be required to purchase health insurance under the Affordable Care Act.
If you don't have health insurance you may be eligible for financial assistance from the government called a subsidy or premium assistance tax credit to help pay for health insurance.
Here are some answers to common questions about health insurance subsidies:
What exactly is a subsidy or premium assistance tax credit?
A subsidy or premium assistance tax credit can be applied to your monthly insurance premiums to help you pay for your health insurance when purchased through the health insurance marketplace. You can also choose to take the assistance as a tax credit when you file your 2014 taxes in 2015.
Who is eligible for a subsidy?
If you purchase health insurance through the online federal or state health insurance marketplace, then you can apply for a subsidy to help you pay for your health insurance. You can find more specific information about the marketplace and look up health plans in your state by visiting healthcare.gov.
Uninsured lower to middle income individuals under age 65 who are not eligible for other insurance coverage through their employer, Medicaid or Medicare may qualify if they purchase coverage through the health insurance marketplace.
Your eligibility is generally determined by your household income and family size. The lower your income, the larger your tax credit.
What are the income requirements to qualify?
Income requirements are based on the federal poverty guidelines and household size. If your household income is less than 400 percent of the federal poverty level, which for 2013 is $45,960 for an individual and up to $94,200 for a family of four, then you may be eligible for a subsidy.
The internal revenue service will report your income from your previous year's tax return to the health insurance marketplace for you. When you fill out an application for a subsidy using the online exchange, you will also be asked about your current income situation to determine eligibility and how much of a credit you may receive.
If your 2014 income is lower than estimated when you applied for a subsidy, you may receive an additional tax credit when you file your 2014 taxes in 2015. Conversely, if your 2014 income is higher than estimated when you received your subsidy, you may have to pay back some of the subsidy when you file your 2014 taxes in 2015.
How much money will I receive?
Your contribution is determined on a sliding scale from 2 percent of household income for individuals under 133 percent of federal poverty level to 9.5 percent of household income for people between 300 to 400 percent of the federal poverty level.
Your subsidy amount is the difference between your expected contribution and the cost of the benchmark health insurance plan.
For example, a family of four with a household income of about $47,000 (roughly 200 percent of the federal poverty level) will have to contribute $47,000 x 6.3 percent (or $2,961) on their health plan. If their health insurance policy is $9,200, their subsidy will be about $6,239 ($9,200 - $2,961).
How do I get the subsidy?
If you choose to get the premium tax credit or subsidy in advance, the government sends the money directly to your health insurance company on your behalf. Your health insurer credits that money toward your cost of health insurance premiums, which decreases how much you'll pay each month.
If you do not choose to have your subsidy help pay for your health insurance, you can receive it as a tax credit on your 2014 taxes when you file your taxes in 2015.
What happens if I donât buy insurance?
Individuals who do not purchase health insurance for themselves or family by the March 31 deadline will have to pay a fee of $95 per adult and $47.50 per child or 1 percent of your annual household income (whichever is greater). The amount of the fees will increase each year. However, some individuals are exempt from paying the penalty. To find out if you qualify for an exemption, visit healthcare.gov/exemptions.
Lisa Greene-Lewis is a certified public accountant and TurboTax tax expert. She has more than 15 years of experience in tax preparation, including positions as a public auditor, controller and operations manager. For more tax-related tips, go to blog.turbotax.intuit.com.
