Hal was a former staff writer, where he monitored the insurance industry and helped consumers make smart medical decisions.
Updated on September 9th, 2024
Garrett Ball is the owner of Secure Medicare Solutions, a national, independent Medicare insurance brokerage that works with 30+ companies in 43+ states. Secure Medicare Solutions has been in business since 2007 and worked, first-hand, with tens of thousands of people going onto Medicare or already on Medicare.
We want to help you make educated healthcare decisions. While this post may have links to lead generation forms, this won’t influence our writing. We adhere to strict editorial standards to provide the most accurate and unbiased information.
Answer a few easy questions to calculate your ACA subsidy eligibility in seconds.*
ACA subsidies are based on an estimate of your future income, which often leads to inaccurate subsidy amounts due to the unpredictability of future earnings.
There’s no penalty for overestimating or underestimating your subsidy; any discrepancy will be adjusted in your tax refund or payment.
The IRS reconciles subsidies using Form 8962, and issues may arise if your income falls outside the 100%-400% federal poverty level range.
One of the weird quirks about Affordable Care Act health plans (also called ACA or Obamacare) is that most people don’t pay the full sticker price.
But if you overestimate your income for Obamacare, you may have to pay your government healthcare subsidy back.
Does that mean you should fear the subsidy? Not at all. If you can’t afford to pay your full ACA subsidy back, you generally won’t have to.
The Affordable Care Act virtually ensures that you won’t have an accurate subsidy. That’s because your ACA subsidy is determined by your best guess of your coming year’s annual income.
You can make an educated guess using last year’s income, but there’s no way to truly enter the correct amount in advance. After all, it’s impossible to know the future. It’s normal for most people to overestimate or underestimate their ACA premium tax credit by a small amount.
There’s no added penalty for taking extra subsidies. The difference will be reflected in your tax payment or refund.
(You can instead pay your monthly premiums in full, then receive your accurate subsidy in your tax refund. This is not common since there aren’t additional penalties for overpayment outside of very rare fraud cases.)
The IRS will reconcile subsidies – for better or worse – using Form 8962, “Advance Payments of the Premium Tax Credit”. You’ll submit this with your taxes if you or someone in your tax family received any subsidies.
ACA subsidies go to people who make between 100% and 400% of the federal poverty level. Subsidy corrections get trickier when you receive ACA subsidies but do not fall within this income level. This is when the IRS clawback becomes a potentially serious issue.
Repayment Limits for Advanced Premium Tax Credits, 2024 Tax Year