ACA Premium Tax Credits: What if Your Estimated Income is Different from Actual Income?

In some cases, individuals who enroll in Marketplace health insurance may need to estimate their income for the year. This estimated income is used to determine their eligibility for premium tax credits, which can help reduce the monthly cost of health insurance.

If your actual income ends up being different from your estimated income, you will need to report the difference when you file your tax return. Depending on whether your actual income is higher or lower than your estimated income, you may receive additional credits or owe money back.

What if My Actual Income is Lower than Estimated?

If your actual income is lower than the estimated income you reported when you applied for health insurance, you will not have to repay any of the premium tax credits you received. In fact, you may be eligible for a larger tax credit.

The health insurance marketplace will calculate your actual premium tax credit based on your actual income. If you receive a larger tax credit, you can use it to lower your monthly health insurance premiums.

What if My Actual Income is Higher than Estimated?

On the other hand, if your actual income is higher than the estimated income you reported when you applied for health insurance, you may have to repay some of the premium tax credits you received. However, there is a cap on how much you would have to repay.

The maximum amount of tax credits you would have to repay is the difference between the amount of credits you received and the amount of credits you would have received if you had reported your actual income.

Avoiding Overpayments

To avoid having to repay premium tax credits, it is important to estimate your income accurately when you apply for health insurance. If you are not sure what your income will be, you can use the Marketplace’s Income Calculator to get an estimate.

If you receive premium tax credits and your income changes throughout the year, you should report the change to the Marketplace. This will help the Marketplace adjust the amount of tax credits you receive so that you do not receive too much or too little.

Seek Expert Help

If you are having trouble understanding the premium tax credit rules or if you need help estimating your income, you can seek help from our licensed agents. They can help you determine your eligibility for premium tax credits and answer any questions you have.

Contact us today to learn more about ACA health insurance and premium tax credits. We can help you find the right health insurance plan for your needs and budget.