Buying Insurance On New Exchange? Get a Tax Credit
Your Money: How health law affects tax law
Erin E. Arvedlund Published Tuesday, October 1, 2013 (philly Inquirer paywall)
Tax law has changed as a result of the Affordable Care Act – Obamacare – and you may either receive a tax refund or pay a penalty as a result.
As of Oct. 1, uninsured individuals can start shopping for health insurance through online marketplaces, also called exchanges.
If you have employer-sponsored insurance, an individual plan, and Medicaid or Medicare, you do not need to purchase anything. If you don’t have insurance and instead purchase through a state marketplace, you may qualify for a tax credit.
It’s complicated, but important to know the rules.
If you purchase insurance through an exchange, you can offset part of your premium with a tax credit, which is paid directly to your insurance company. To qualify for the tax credit, you must meet these conditions:
You purchase coverage through a marketplace.
You don’t have access to affordable employer-sponsored insurance, which means your employer-provided insurance covers less than 60 percent of available benefits, or your premium is more than 9.5 percent of your annual household income.
You don’t qualify for such government programs as Medicare and Medicaid.
Your annual household income is between one and four times the federal poverty level, depending on your state.
You can also pay your entire premium yourself and receive the credit as a refund when you file your return. This might be a good idea if your income is unpredictable.
Starting in 2014, you must have health insurance, or pay a tax penalty.
The penalty in 2014, which will be paid on your 2014 tax return, equals 1 percent of your annual 2014 income or $95 per person, whichever is higher. You pay a penalty for yourself, a spouse, and each dependent. The penalty for an uninsured dependent under the age of 18 is $47.50 per child.
Don’t worry if you’re still working on getting coverage when Jan. 1, 2014, arrives. There’s no penalty if you are without coverage for less than three consecutive months of the year.
To see if you may qualify for a tax credit, visit TaxACT’s Health Care Tax Penalty Calculator (https://www.taxact.com/affordable-care-act/aca-whitepaper.asp ) or TurboTax (http://americantaxandfinancialcenter.com/2013/02/06/the-affordable-care-act-and-taxes-what-you-need-to-know ).