How to Avoid Repaying the Health Insurance Tax Credit

If you receive a subsidy to help pay for health insurance through the Affordable Care Act (ACA), it’s important to understand how your income affects your eligibility. If your income is lower than you estimated when you applied for the subsidy, you may have to repay some or all of the tax credit.

What is the ACA Health Insurance Tax Credit?
The ACA health insurance tax credit is a subsidy that helps low- and moderate-income Americans afford health insurance. The amount of the tax credit depends on your income, household size, and the cost of health insurance in your area.

How Do I Qualify for the ACA Health Insurance Tax Credit?
To qualify for the ACA health insurance tax credit, you must:

Be a U.S. citizen or legal resident
Not be incarcerated
Not be claimed as a dependent on someone else’s tax return
Have annual household income from all sources that falls between 138% and 400% of the federal poverty level (FPL)

How to Avoid Repaying the ACA Health Insurance Tax Credit

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

Estimate your income accurately when you apply for the subsidy. The amount of the subsidy you receive is based on your estimated income for the year. If your income is lower than you estimated, you may have to repay some or all of the tax credit.
Update your income estimate if your income changes. If your income changes during the year, you can update your income estimate on the HealthCare.gov website. This will help ensure that you are receiving the correct amount of subsidy.
Choose a health insurance plan that is within your budget. The amount of the subsidy you receive is based on the cost of the health insurance plan you choose. If you choose a plan that is more expensive than you can afford, you may have to repay some or all of the tax credit.

What Happens if I Have to Repay the ACA Health Insurance Tax Credit?

If you have to repay the ACA health insurance tax credit, the amount you owe will be deducted from your tax refund or added to your tax bill. You will receive a letter from the IRS explaining how much you owe and how to repay it.