How to Avoid Paying Back Healthcare Tax Credits

Even if you are not aware of it, you may actually be eligible for health insurance tax credits that can help you save hundreds of dollars each year. These credits are available through the Affordable Care Act (ACA), and they are designed to help people who earn less than a certain amount of income.

The Poverty Limit Rule

One of the most important things to know about ACA health insurance tax credits is the poverty limit rule. This rule states that you can only qualify for tax credits if your income is below a certain percentage of the federal poverty limit. For 2023, the poverty limit is $13,590 and the applicable percentage is 138%.

What if you earn less than the poverty limit?

If you earn less than the poverty limit, you generally will not be eligible for ACA health insurance tax credits. However, there are some exceptions to this rule.

Transitional relief: If you earned less than the poverty limit in 2021, you may still be eligible for tax credits in 2023. This is due to a transitional relief provision that was included in the American Rescue Plan Act of 2021.
Household size: The poverty limit is based on your household size. If you have a larger household, your income limit will be higher.
Other income: The poverty limit only applies to your income from wages, salaries, and self-employment. Other types of income, such as Social Security benefits or investment income, do not count.

What if you have to repay tax credits?

If you receive ACA health insurance tax credits and you later earn more than the poverty limit, you may have to repay some of the credits. The amount you have to repay will depend on your income and the amount of credits you received.

There is a limit on the amount of tax credits you can be required to repay. For 2023, the maximum repayment amount is $750 per person.

How to avoid repaying tax credits

There are a few things you can do to avoid repaying ACA health insurance tax credits:

Estimate your income accurately: When you apply for tax credits, you will need to estimate your income for the year. Be sure to estimate your income carefully to avoid having to repay credits.
Update your income: If your income changes during the year, you should update your income estimate on the Health Insurance Marketplace website. This will help you avoid receiving too much in tax credits.
File your taxes on time: If you receive tax credits, you will need to file your taxes on time. This will help you avoid any penalties or interest charges.

If you have any questions about ACA health insurance tax credits, you should contact a licensed health insurance agent. They can help you determine if you are eligible for tax credits and help you avoid repaying credits.