Healthcare Tax Refunds and How It’s Affecting the Average Joe Right Now
Two things are certain in life: death and taxes. For US citizens, this is the first year that taxpayers have to deal with Obamacare, or the Affordable Care Act. This law undoubtedly strives to make health care affordable to everyone, but it might also lower tax refunds.
In general, most people have to carry health insurance in order not to pay a fine. If you are making less than four times the Federal Poverty Guideline, you might receive subsidies that will reduce your monthly health insurance premiums. On the other hand, non-exempt US citizens without an insurance plan face a penalty from 1% household income to $95 per person, whichever is greater. No matter if you’re paying fine or receiving subsidies, both of these aspects will be addressed on tax forms and they can surprise the filers.
If you want to receive a subsidy, Obamacare requires you to estimate what your future income for the next year will be. Eligible household will receive reduced premiums according to subsidies sent by IRS to insurance companies. In case you guessed wrong about your income, the IRS would pay too little or to much to insurance companies and the difference will be balanced out on tax refunds. Undoubtedly, people have a difficulty guessing their future income and according to some expert predictions, more than 3 million people who received subsidies will have reduced tax refunds this year because of the underestimated income. There is a $2.500 cap on paybacks, while some tax filers may need to return thousands of dollars back to the IRS. Nevertheless, most people have health insurance coverage without subsidies, so they need to check a box on their 1040 tax form – to show they have health coverage all year. On fraction of taxpayers will claim an exemption if they are not able to afford insurance or ensure they did receive the correct subsidy. And, there will be a small fraction of taxpayers that will have to pay a fee if they didn’t obtain affordable coverage.