Question: Which of these events could impact your Obamacare subsidy amount: taking a promotion that includes a pay raise or experiencing a lull in your freelance work that decreases your income?
If your income changes after you buy health insurance and start receiving an advanced premium tax credit subsidy, you have to report it—whether it goes up or down.
When you buy an Obamacare plan and apply for an advanced premium tax credit, the amount of subsidy you are eligible for is based on your expected income and household size for the year ahead—not the previous year. As such, your Obamacare subsidy may fluctuate with your income.
- Your subsidy could decrease, if your income increases—you could lose your eligibility altogether.
- Your subsidy could increase, if your income decreases—you could also become eligible for Medicaid.
To find out how an income change could impact your premium tax credit amount, you can use a subsidy calculator tool such as the one available at www.healthedeals.com.
Where, when and how often to report income changes
No matter how often your monthly income changes—one time or 12—you must immediately report it to the state-based or federally facilitated health insurance exchange from which you purchased coverage and applied for a subsidy.
You can report income changes online, over the phone and in person. Visit HealthCare.gov to learn how to report changes online in states that use the federal exchange portal. Click here to find your state’s exchange website.
You must report these changes every time they occur. Your advanced premium tax credit will be adjusted accordingly, and you may find your next health insurance premium is more or less than what you previously paid.
If you fail to report changes, you may:
- Receive a larger subsidy than you are eligible for, which means you could have to repay some or all of it when you file your 2016 taxes. This will result in a larger tax balance or a smaller refund. There may be a limit on how much you have to repay.
- Receive a smaller subsidy than you are eligible for and miss out on monthly premium savings. At tax time, this will either lower what you owe or result in a refund.
If you have questions about changes that impact your advanced premium tax credit or reporting such changes, contact your state-based or federally facilitated exchange. Speak with your accountant or tax adviser if you have other questions regarding Obamacare and your taxes.
Other changes you should report
There are other changes in life circumstances that can impact your Obamacare subsidy amount. They include but may not be limited to increases or decreases in household size as well as moving to a different address or gaining or losing eligibility for government-sponsored or employer-sponsored healthcare coverage.1
Is there a way to avoid reporting changes?
If you are already receiving an advanced premium tax credit, you must report changes through the remainder of this year. As mentioned above, if you fail to do so, you may see an impact at tax time when you must claim and reconcile your Obamacare subsidy using Form 8962.
Those with incomes that tend to vary a lot throughout the year (e.g., individuals who work freelance) may find they don’t want to be reporting changes frequently. These individuals might opt to skip the advanced premium tax credit option and instead do either of the following2:
- Take some now – You can choose to have some of the subsidy amount for which you are eligible paid in the form of an advanced premium tax credit and receive the difference when filing your tax return.
- Take it all later – You can choose to receive any premium tax credit amount for which you are eligible when you file your tax return.
Remember: You must purchase your Obamacare plan through a state-based or federally facilitated health insurance exchange to qualify for subsidies.
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