ACA Premium Tax Credit: What Happens When Your Income Changes Mid-Year?

The Affordable Care Act (ACA) provides financial assistance to low- and middle-income Americans to make health insurance more affordable. One of the ways the ACA does this is through the Premium Tax Credit (PTC), which helps reduce the cost of monthly premiums for health insurance plans purchased through the Health Insurance Marketplace.

But what happens if your income changes mid-year, like in the case of the individual described in the post? Will you have to pay back the subsidies you received?

The Repayment Threshold

The answer to this question depends on how much your income increases. The PTC is based on your expected income for the entire year. If your income ends up being higher than you expected, you may have to repay some or all of the PTC you received.

The amount you have to repay depends on your filing status and your income relative to the Federal Poverty Level (FPL). For example, if you are single and your income is between 200% and 300% of the FPL, you will have to repay a maximum of $750.

How the Repayment Works

If you have to repay some of the PTC, it will be included in your tax return. This means that your refund will be reduced by the amount of the repayment. In some cases, you may even have to pay additional taxes.

What to Do if You Have to Repay the PTC

If you think you may have to repay the PTC, there are a few things you can do:

1. Estimate your income for the year. This will help you determine how much PTC you are eligible for.
2. Adjust your PTC payments. If you think your income will be higher than you originally estimated, you can reduce your PTC payments. This will help you avoid having to repay a large amount of money at tax time.
3. Contact a tax professional. If you are unsure how to calculate your PTC or if you have any other questions about the repayment process, you should contact a tax professional.

Conclusion

If your income changes mid-year, it is important to be aware of the potential impact on your PTC. If your income increases, you may have to repay some or all of the PTC you received. By understanding the repayment rules, you can avoid any surprises at tax time.

If you have any questions about the PTC or other ACA-related topics, please do not hesitate to reach out to our licensed agents for help. We are here to assist you in finding the best health insurance plan for your needs and budget.