One of the most important contributions that President Barack Obama has given to America is the signing of the Affordable Care Act in 2010. Ever since he sat in office in 2008, the President of the United States has continuously passed bills that are aimed at improving the lives of every American. And with the Obamacare act, a lot of people would surely benefit from it.
The Obamacare program’s main objective is to help individuals and families with lower income to afford health care. The fact that this law will give those who belong in the poverty level a chance to receive the best health care services possible makes it a very important bill to be passed.
Aside from that, retirees can now have peace of mind knowing that their health care needs will be taken care of. This means that those who were afraid to retire because they don’t have any savings will now be able to stop working.
Now, there are guidelines as to how much subsidy every person or family can receive. It helps to know, though, that the cost assistance you can get to help pay for monthly insurance premiums is only up to a maximum income level based on how many family members you have.
What Is Considered Income?
Gross income (income before taxes) includes wages, net profit from self-employment, rental income, interest, tip, pensions, alimony, other investments and social security payments. All of this is included in the Modified Adjusted Gross Income or MAGI, which will be shown on your tax return. It is also important to declare all dependents’ income, even if they filed tax returns on their own.
Cost Assistance And Federal Poverty Level
Generally, if your family income is from one to four times the published Federal Poverty Guidelines (100% – 400% FPL) for the size of your household and you are not qualified for an employer- or public-assisted healthcare like Medicaid or Medicare, then you are eligible for premium subsidies to help you afford a health plan through the marketplace.
If you qualified to purchase a marketplace plan and met the requirements, you can file for the Premium Tax Credit (PTC) on your tax return. Alternatively, you can take the tax credit in advance in the form of Advanced Premium Tax Credit (Advanced PTC), which can be paid in part or in whole to your insurer.
How To Calculate Health Insurance Tax Credit?
Step 1 – Calculate your MAGI
Your MAGI (Modified Adjusted Gross Income) is used by the IRS to determine if a taxpayer is qualified to certain deductions, retirement plans, or credits. It will be used to know if you are eligible for health insurance tax credits. But starting 2014, every taxpayer’s MAGI is used to determine eligibility for premium tax credits on the new Health Insurance Marketplaces.
Income counted as MAGI:
- Earned income
- Self-employment, business and farm income after deduction of business expenses
- Wages, salaries, tips
- Social security income (SSA)
- Unearned income
- Unemployment compensation
- Portion of scholarships, fellowship grants or awards
- Alimony received
- Taxable state income tax refunds and credits
- Capital or other gain
- IRA distributions
- Rental real estate income and royalties
- Pensions and annuities
- Other income if taxable (prizes, jury duty pay not given to employer, etc.)
Step 2 – Use your MAGI and household size to determine how much tax credit you are eligible for
Federal Poverty Guidelines are based on Gross Income, not Modified Adjusted Gross Income (MAGI), which is the basis for cost assistance in the marketplace. This means that you should use your MAGI when referencing the FLP chart for when buying health insurance under the Obamacare program. Your dependents’ Adjusted Gross Income (AGI) will be added to your MAGI to determine your family’s income and find out how much cost assistance you’re going to get.
Should your income fall below these ranges, you may be eligible for Medicaid assistance. Depending on whether your state expanded such program, you may be able to qualify for even cheaper health insurance.
Important Tips for Projecting Your Income
1.When you report income to the Marketplace, you are reporting projected MAGI, which is expected income after most tax deductions.
2. The amount of your MAGI determines your place on the Federal Poverty Level (FPL) Guidelines, which is how much assistance you are going to get will be based on.
3. States that didn’t expand Medicaid will provide maximum assistance at 100% of the FPL. For those that did expand, you’ll need to report more than 139% of the FPL. But if you don’t want Medicaid, you don’t need to report these amounts.
4. Know if your state expanded Medicaid. If your household income is under 138% FPL, then you will be qualified for Medicaid. If your state didn’t expand, income is not the only basis for eligibility, while income limits can be lower than 50% FPL.
5. If you claim below 100% of the FPL and your state didn’t expand Medicaid, you could not have any options. You can report a higher income and determine how to claim additional income.
6. If your state didn’t expand and your child needs health assistance, you can have options under CHIP, which is extended to all low-income children.
7. For you to be able to qualify for Cost Reduction Subsidies, you need to project between 100% – 250% FPL.
8. Never report income over 400% because you won’t get assistance.
9. There is no need to pay back Cost Sharing Reduction subsidies or Medicaid.
10. You don’t have to pay back tax credits that are below the repayment limits.
11. Remember to adjust your information within the year so you will get the right cost assistance, but consider paying back excess credits to avoid losing cost assistance.
The Obamacare program is created to help save lives by offering affordable health care for all. Find out how much cost assistance you are eligible for today.