What happens if I overestimate income for tax credits and my state didn’t expand Medicaid?

I’m self-employed, live in Maine and need to have a minimum annual income of approximately $11,500 to qualify for Obamacare. What happens if I estimate and expect to make that much and receive the subsidies, but then don’t actually make that amount by the end of the year? Will the payback caps in place for people who UNDER estimate their income also apply to people who overestimated and then didn’t actually qualify for Obamacare?


Answer

If you estimated your income to qualify for subsidies, but didn't make enough, you don't owe back any money and can keep the tax credits you got in advance. You can learn more about repayment limits on advanced tax credits here.

As long as you are making a reasonable estimate of income you won't get in trouble for falling short.

If you make enough to claim tax credits (100% or more, and you overestimated then you claim the additional credits on form 8962). The question itself asks about Medicaid (i.e. falling below the 100% poverty level in an expansion state). Falling below 100% means you are not eligible for credits or repayment. Do check the above link about repayment limits in all cases.

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Nola Jones on

I don’t know about Maine, but Louisiana refused the Medicaid expansion, so adults with incomes too low for the Marketplace but above the poverty level do not qualify for any subsidies. I am also freelance, and it’s been a tough year. I think I may not qualify for the Marketplace subsidy. Will I need to refund all of the premiums for the year because I made too little money? Will I need to pay a penalty?

ObamaCareFacts.com on

If you make too little for tax credits then you’ll either owe no money or the minimum amount. You can see exactly how the repayment process works by looking at page 11 of the 8962 instructions: https://www.irs.gov/pub/irs-prior/i8962–2014.pdf

You can see a simplified breakdown here:
https://obamacarefacts.com/advanced-tax-credit-repayment-limits/

jasonrevall on

“If you make too little for tax credits then you’ll either owe no money or the minimum amount.” Which is it? Thats two answers. If I’m working a temp job and then they let me go and I don’t wind up making what they said I would (the people at the marketplace forced me to pretend I’d be working all year even though I told them it was a temp job) and qualify for medicaid will I have to pay back my tax credits? why would i have to pay 300 bucks to the government because i lost my job and tried to tell them my estimate but they refused it and did it on hourly income instead?

Erin on

If you are covered by Medicaid, you are not eligible for cost assistance. However, that isn’t retroactive, so if you were deemed eligible by the marketplace for cost assistance on health insurance premiums, but during the year your income dropped and you become eligible for Medicaid you can apply for Medicaid. You only become ineligible for cost assistance once you are enrolled in Medicaid. If your income is below the tax filing threshold for the year, your not required to have health insurance and won’t owe the fee, but you will have to file taxes if you wish to claim any additional Premium Tax Credits you may be eligible for. If your projected income was above the 100% FPL and you were otherwise eligible for getting cost assistance on the marketplace (i.e. not offered employer insurance, etc.) than you are still eligible for tax credits on your taxes even if your income ends up being below 100% FPL at the end of the year. See “Estimated household income at least 100% of the Federal poverty line” in the instructions for form 8962. The only time you are required to pay back Premium Tax Credits is if your income is higher than you projected or you weren’t eligible to use the Marketplace at all because you were offered another form of minimal essential coverage (Tricare, employer sponsored insurance, or Medicaid). Sounds like the Marketplace didn’t deem you eligible for Medicaid, so unless you apply for Medicaid after losing employment AND that application is approved, you are still eligible for Medicaid for that year. That being said, if your income falls below 100% FPL this year, you may have to demonstrate that you have greater income to be eligible to use the Marketplace and get cost assistance in the following year.

customer on

“…if your income falls below 100% FPL this year, you may have to demonstrate that you have greater income to be eligible to use the Marketplace and get cost assistance in the following year.”

How exactly do you have to demonstrate this to qualify for cost assistance in the following year?

ObamaCareFacts.com on

You would likely have to prove it to healthcare.gov by sending documentation, like what you would do for special enrollment.

John on

Your asking the exact same question that the post answered

Keshia on

2014 when the insurance lady put my estimate income for the year to what I normally would make as a waitress it was 19,000 but I got a promotion starting the second week in August so made my income 33,000.00 but it was only from August to Dec that I was getting this and it was going back to what I estimated. I’m a single mom she has Medicaid. Will I owe anything

Melissa stone on

What do I need to do cause when I file for medical they had me down is 18,000 and I and made 28,000 what do I need to do

STEVE DI SANO on

my income in 2014 was estimated at 30000. I was paying 245. per month with 6000. deductible but in 2014 my earning were 20,264. how do I get money back for overpaying healthcare .gov from blue shield. and in 2015 my estimate was 36,800 . I was paying 338. per month w/ a 6000. deductible, and 2015 my earning were 24754. I know I over paid how do I get some of the money back. I asked for a revise 1095 A form and they claim it can’t be done. looking forward for your help in this matter. thank you in advance.SD.

ObamaCareFacts.com on

If you overpaid then you can file for advanced tax credit repayment on form 8962. If BCBS simply owes you money not related to tax credits, then you have to call them.

KB on

I am self-employed. I expected to earn a normal wage this years because of lump sum contract I had. Based on my estimations, I didn’t qualify for a tax credit, and thus paid the $350/month premium out of pocket, believing the Obamacare literature: that I overpaid, I’d get credit back when I filed taxes, and if I underpaid, I’d owe. However, the contract did not pay out in tax year 2015, and my income ended up at around a dismal $5,000. Now, when I file my taxes, I’m told that because I made TOO LITTLE, I won’t be given back ANY of the premiums I paid up front. THIS MAKES NO SENSE. If I had low-balled my income, I would have gotten the premium assistance, and I would owe nothing back. And now, ironically, because I made LESS, I get none of the $4,200 I paid out in premiums because I didn’t cross the poverty threshhold!? Further, I can’t claim this as self-employed cost because I went through the Marketplace! I’ve called Covered California. Their only explanation is that I should have been on Medicaid. Had I known I’d end up without the money from the contract, maybe I would have — but how would I have known at that time? Sometimes my contracts pay out just before Dec. 31. What am I missing? What can I do? This seems like a miscarriage of tax laws and penalties.

ObamaCareFacts.com on

That is brutal. It also brings up like 5 hidden sticking points of the ACA that we never talk about because we end up answering more basic questions.

So you are right, you are better off being a “tax credit hog” and then paying back the IRS as needed then you are being “conservative” and only taking credits at the end of the year. This rule favors the people, but the people taking advantage tend to be PISSED when they have to repay. So I consider this two big strikes, despite the wisdom of it.

But yeah, what can I say, you should have gotten free coverage and instead you paid a bunch of money. This year, the contract will dump more money in your lap, that will put you in a wholly different situation.

My only real suggestion to people is to nerd-out a bit on our tax advice section. We only give white-hat advice, and that advice includes subtle hints that it is better to take money and pay back finically… but of course, if everyone took this advice you would have angry mobs when repayment time came from those who made more.

You can see how this aspect of the ACA lacks elegant design.

Karen on

If i estimated that I would be making, say, $40,000 and I only made, say, $25,000 then I would have been paying way too much for my insurance. Why in the world would I be worried that I would owe the government. They should owe me not the other way around!!!
Stupid answer.

ObamaCareFacts.com on

Ok to clarify if your income still allows you to claim tax credits, then you get money back via form 8962. If you fall below 100% then you just don’t owe money back (you were below 100% so you never qualified for tax credits). Unless there is a loophole i’m missing?

theresa garner on

I projected my 2015 income to be 15, 000.00 but I only made 10,000.00. I have obamacare thru the market place will I have to pay obamacare back due to not making enough money for the year?

Pepper Lee on

I am in the same situation and am still confused by your answer. I figured my income to be right at 100% of the poverty level, but for 2015 I am at 80%. Will I have to repay everything, since you don’t qualify for subsidies below 100%?

ObamaCareFacts.com on

No. I am under the impression you owe back nothing, although the chart in 8962 shows a max fee of $300 – $600 under 200% FPL. See here https://obamacarefacts.com/advanced-tax-credit-repayment-limits/

So to be clear, you don’t have to repay everything. That only happens if you go above 400%.

Cat on

Still not entirely clear on the consequences of living in a Medicaid expansion state, taking APTC all year (as opposed to trying to get credits when filing taxes) and then ending up with income far lower than anticipated.

If I end up making <100% PFL, must I return any APTC? (Again, I'm not asking about claiming credits when I file my taxes. I see that the IRS is treating the possible adjustment of APTC received during the year _versus_ claiming credits when filing for taxes differently.)

Also, because eligibility for Medi-Cal (what Medicaid expansion is called here in California) goes all the way up to 138% FPL, does that change things?

I just went line by line through IRS Form 8962 and Instructions for tax year 2016, and I can't find any reference/adjustment for a taxpayer in an expansion state. 8962 uses the 100% in its calculations and says below that taxpayer does not repay anything (if taxpayer satisfies a list of conditions, see instructions). Plus, it doesn't mention a fee.

Am I understanding this correctly?

Also, do you know if the FTB (California's state income tax department) has some way to claw back APTC?

Many thanks!

HH on

Virginia resident (no medicaid expansion) here.

I am currently unemployed but don’t plan on being this way forever. Flirting with returning to school. Am I hearing this correctly? Would it be better for me to estimate an income high enough to qualify for a subsidy now, then later, during next year’s income taxes, if I didn’t make enough (even if it’s 0 income), what I’ll owe back for those subsidies would be capped under law? Meaning that I wouldn’t have to pay back the whole subsidy.

THAT could be the difference between having and not having insurance in a no medicaid expansion state. If you could confirm what I said above being the case that would be much appreciated. Thanks.

Mary Snyder on

What about half way through the year and you are paying way too much for your health insurance, can you get your premium re-evaluated?

David on

What if I accidentally put my income higher than it is and got denied Medical Assistance and my actual income would qualify. I can’t find a way to go back and edit the income after it was submitted and it won’t allow me to start a new file because it says I have an active one.

ObamaCareFacts.com on

In a case like this you should call the marketplace directly. You can always revise your income and other factors. Not only can you, but you are actively encouraged to do so. Should be an option in your account, but just call if you can’t find it.

Nancy tom on

You can religious in and click life change or something to that matter. When I out in my income to be less than last year, I was eligible for nothing. When I revised it, I was eligible for expanded medicaid. My income for this year puts me too low for help. How can something like income be too low? Ugh

Jane on

If I estimate my income to be $30,000 and it is only $26,000. I take the subsidy for $30,000. What will happen?

ObamaCareFacts.com on

Either nothing or you’ll be owed back money when you file form 8962. You can always adjust your projected income mid-year by contacting the marketplace or signing into your account.

Catherine on

Looks like I posted my question as a reply rather than a question, so I’ll try again.

What are the consequences of living in a Medicaid expansion state, taking APTC all year, and then ending up with income far lower than anticipated.

If my MAGI ends up <100% PFL, must I return any APTC? Because eligibility for my state's Medicaid expansion goes all the way up to 138% FPL, does that change things?

In the IRS Form 8962 & Instructions for tax year 2016, and I can't find any reference to a taxpayer in an expansion state. 8962 uses 100% FPL in its calculations and says below that taxpayer does not repay anything (if taxpayer satisfies a list of conditions listed in the instructions). Is there an adjustment for being in an expansion state that I'm not seeing?

Erin on

If your income is lower than expected, even if it drops below the Federal Poverty Level, you should get more PTCs than expected on your year end federal taxes (up to the maximum based on the Second Lowest Cost Silver Plan) in your demographics. However, if your state has expanded Medicaid, they may require that you accept Medicaid coverage for the following year or show that you will be able to earn at least 100% of the Federal Poverty Level during the next year. Medicaid administration is state based and many state’s have developed their own programs using ACA Waivers. So state Medicaid programs vary pretty widely in coverage options and eligibility. Washington State, for example has covered adult dental care through Medicaid since 2014. At the same time, Indiana’s Medicaid was modified to included monthly premiums on a sliding scale for Medicaid coverage from $1-$27 for incomes 0-138% of the Federal Poverty Level. For that reason, you should find and call your state’s Medicaid program to find out how a change in income will affect your specific options for enrollment for the following year.

Jason on

I estimated my income for 88,000 which put my monthly payment of 988.00 a month. I then got another job that offers insurance. I only had to pay it for 4 months. Should I get money back from that?

Erin on

The Premium Tax Credits you are eligible for is based on your annual income, but the average monthly income is used for reconciliation. The same is true for tax credits your eligible for, they are divided by 12 months if you are only eligible to receive them for some of those months. As long as your income isn’t higher than projected and you ended your Marketplace plan on the month you were eligible to enroll in the employer’s plan, you should be fine. If your income is higher than projected, you may owe tax credits back, but only based on the advanced credits you receive for those months.

jason depretis on

I would like to know if you did earn above the fpl but didn’t make anywhere near what you thought you would due to being unemployed for a good part of the year and also being in a state (fl) that didn’t get Medicaid are you eligible for increased tax credits to be used kind of like a deduction on my tax return for 2016? Also if this is possible how do I go about getting this taken care of because I made less than half of my estimate and could really use all the help I can get this year.

ObamaCareFacts.com on

You do all your accounting at the end of the year, so if you made above 100% fpl, but less than you estimated, you just get an increased credit.

If you make less than 100%, and didn’t take advanced tax credits, you are in a more difficult situation. I don’t think you would be allowed to take them (although i’d have to review the 8962 instructions to be 100% sure).

With that said, the GOP are floating even more restrictive laws regarding this, so anything we say now is subject to change.

Jennifer on

This is my second year fir obamacare. I worked the first year and got let go right after I reapplied for 2016. I barley made 500.00 fir 2016 year. I estimated it to be around the previous year if 12.000. I didnt work the rest if the year. I had surgery. I couldn’t find a job fit for over 10 months. I have a fruend in medicad that told me because all my house bills were in my name and my boyfriend was paying my bills until I found a jib that I wouldn’t be eligible fir medicad. Will I have to pay this back? Im still looking for work?

Leslee on

I don’t understand I am a single mother and I got a tax credit but when doing my taxes they state I owe because of Health Insurance .Is there some sort of table I can look at tosee how this works andincome levels to what credit one gets

Adrian Cooke on

If I made less than my estimated amount will I lose my coverage or does it go by what I specify on a year to year basis?

CMay on

When I applied for Obamacare in 2016, my estimated income was very low, so my premium was manageable. However, I finally got a decent job with health insurance in Oct, and was able to discontinue my Obamacare coverage. But as I am filing my taxes, it seems my income is much higher than previously estimated (because of my new job) and now I am being penalized for having had Obamacare. It is almost like I am being penalized for getting a good job and being more self -sufficient. It this correct? Once I was covered by my employer’s health insurance, I no longer used Obamacare. But when I was covered under Obamacare and needed it, that was the only way I could afford insurance. Am I missing something? Thanks, in advance!

Vince on

I overestimated my income for 2016, however, I paid the full amount of my ACA insurance premiums each and every month at the advice of my CPA who claimed I would get back the subsidy at the end of the year. My adjusted net income is a loss for the year, or 0.00 income earned for 2016. How am I reimbursed for the subsidy amount of the premiums that I already paid when I now show zero income and zero tax owed?

ObamaCareFacts.com on

So when you fill out form 8962 up to Part 3 you’ll see how tax credits are rectified. I would have to work through the form again to confirm this… but I’m pretty sure you just got yourself in about the worst position you could. That position is that you would have been way better off taking all the upfront tax credits and not paying them back. By the book, you don’t qualify because you didn’t make enough money.

Had you projected making above 100%, and then didn’t, you would have just kept the credits. I don’t think you can do this in retrospect though.

I tell people not to take them in advance if they think they will go over 400%, that is good advice and probably what the CPA was thinking. However, going under 100% is not as fun in retrospect. It means you should have gotten free medicaid, wouldn’t have owed the fee, but instead owe the full price of your coverage.

That is why single payer, public option, or tax credits for any income group make a lot of sense and why the current system is a little frustrating.

Still, I may be fuzzing on something memory wise and perhaps there is a workaround in the 8962 form (you should 100% work through it and see).

Also, it may be economically sound for you to not take a deduction you are taking and thus hit 100% FPL and claim the credits.

Lets say your losses put you just below $0. In that case, can you move those losses until next year? Is it economically sound to just not take them? If your tax credit would be big enough, does it make sense to rework everything to hit that 100% mark? Those are questions to ask yourself.

Cyndi Craven on

RE: “Also, it may be economically sound for you to not take a deduction you are taking and thus hit 100% FPL and claim the credits.”

I have read that it’s illegal to NOT take all of your eligible business deductions if you are self-employed. See the 2nd Q & A on this page:
https://www.eitc.irs.gov/Tax-Preparer-Toolkit/faqs/income
Has to do with the Earned Income Tax Credit curve.

I also overestimated my income for 2016 and received the maximum credits. I am now doing my 2016 taxes and found that even without taking most of my usual business deductions my AGI is below the FPL. And, I’m GA which did not expand Medicaid.

Wondering what I do about this. When/if I report my situation to HealthCare dot gov, will I lose the insurance and credits I’m currently receiving here in 2017?

Alex on

This might be similar to other people’s questions, but I’m still a little unclear of my situation. I lived in California 2014-2016. When I first moved there, I qualified for Medical, and they even keep sending me stuff. However, I shortly after earned enough income to qualify for subsidized insurance, so I changed to a subsidized plan, and did my taxes accordingly just fine for 2014 and 2015. For 2016, I earned just above the FPL (12,000 or so), since I spent half of the year traveling, but still got my subsidized insurance, because I projected earning more than that. Now I am doing my taxes, and I’m not sure what will happen since technically in california that income would qualify me for Medical, but I had Marketplace insurance. I have been filling out my turbotax, and it says that I will be credited some money back (I imagine since my income didn’t match what I had initially projected), but I don’t know if something else will happen….could they retroactively take away my marketplace insurance since I would have qualified for Medical? Now I also live in Oregon and do have qualifying income for Marketplace insurance, so will it impact that in any way?

Any advice is greatly appreciated!

Suzanne on

I live in California, I am 64 years old. I estimated that my Adjusted Gross Income to be 16 K to 17 K for 2016. I am doing my tax return and I have UNDER-estimated income by 7 K. I received Covered CA for all 12 months with the Silver Plan. I am using Turbo Tax, it is giving me a refund. Will I have to pay back any of the premium assistance that I received during the year? If so when? because it is not coming up as a penalty on my 2016 tax return?

Erin on

You may owe back premium tax credits that were advanced to you during the tax year if your income is high enough, but there are limits to what you would be required to repay which are based on your income and family size. It’s important to update the marketplace during the year if your income changes so that adjustments can be made to your advanced premium tax credits, in order to avoid owing back premium tax credits on your year end taxes.

Ann on

I overestimated my net income for 2016, and did not use all of my medical credit. yet I owe $107 back. I don’t understand this. should I not get this money back, not have to pay it?

John on

What happens if I estimated enough to get a subsidy ($16,500) but I only made $14,900.
I needed to make about $16,300 for the subsidies. I was getting almost $500 in tax credits
per month. Since I fell short of about $1300, will I have to pay back all the tax credits ($6000) that I received?

Erin on

No, there are limits to how much a person can owe in back tax credits if they under estimated their income, as well as, protecting those who estimated earning over 100% of the federal poverty level, but were’t able to. Here is more information about the ACA premium tax credit repayment limits: https://obamacarefacts.com/advanced-tax-credit-repayment-limits/

Leonard on

Last year we estimated my wife’s income to be around $12000.00. She was fired in march but thinking we had to wait til November to make changes we kept pay the $2.50 premium; we did this for six month before finding out that we had to report her change in income. The subsidies over six months will equal $4000-$5000; her income now for 2017 is $2000.00. My wife will not work for the rest of the year; I am on social security and medicare. Will she have to pay back the subsidies?

This is insurance that we did not need, did not want, did not use, Are we in trouble; we do not have $1000.00 much less $5000.00.
Any advice would be welcome.

Thank You for your time.
Leonard

ObamaCareFacts.com on
Vinny Losh on

I have a question plus a bit of an example.. So I had insurance through the marketplace(obamacare) beginning of 2017. I put my estimated income to be ~20,000. however by May I had got a much better job and made more money, when this happened I called an canceled my marketplace insurance (on may 24) telling them I got a better job, more money, and I no longer needed the insurance. Now its tax time and when filing it is telling me I have to pay back the premium credits for Jan-May of 2017.. The exact months I was correctly using the tax credit because I was not making enough. Im confused, is that correct? I followed all the rules and laws – I signed up for this awful insurance that I didn’t get to use (5700~ deductible) because it was the law and I did everything right, canceled it and told them I got a better job and now they want me to pay back the tax credits I received for following appropriate guidelines? Can you help guide me on this?

ObamaCareFacts.com on

Tax credits are based on annual income. Even though you needed and got assistance at the start of the year, you didn’t end up needing it on-paper by the end of the year. Thus you owed back tax credits based on annual income, family size, and the repayment limits from form 8962.

In a case like this it is like the government fronted you tax credits, as you needed them at the time, but then expects them back as it turned out you didn’t need them when a full year is considered.

It does not feel good to owe money back, and in this sense it is an odd mechanic. However, it is also useful as it ensures that you can get covered even when you don’t currently have the funds to insure yourself.