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Repayments and refunds: estimating the effects of 2014 premium tax credit reconciliation
Repayments and refunds: estimating the effects of 2014 premium tax credit reconciliation
- Collection:
- Health Policy and Services Research
- Series Title(s):
- Issue brief (Henry J. Kaiser Family Foundation)
- Author(s):
- Cox, Cynthia, author
Damico, Anthony, author
Glaxton, Gary, author
Ma, Rosa, author
Levitt, Larry, author - Contributor(s):
- Henry J. Kaiser Family Foundation, issuing body.
- Publication:
- Menlo Park, CA : Henry J. Kaiser Family Foundation, March 2015
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Health Insurance Exchanges -- economics
Health Insurance Exchanges -- legislation & jurisprudence
Income -- statistics & numerical data
Income Tax -- legislation & jurisprudence
Income Tax -- statistics & numerical data
Taxes -- legislation & jurisprudence
Taxes -- statistics & numerical data
United States
United States. - Genre(s):
- Technical Report
- Abstract:
- In January 2014, the Affordable Care Act (ACA) began making federal premium tax credits available to eligible individuals who purchased health coverage through exchanges, or Marketplaces. These subsidies are a centerpiece of the law and are designed to provide financial assistance to millions of Americans who could not otherwise afford health coverage. Taxpayers may claim a premium tax credit for themselves and other family members based on their income for the year. An individual or family may also elect to receive an advance premium tax credit (APTC) based on projected household income. Projected income may be based on previous income history and may be documented with the most recent available tax return or with other evidence of income. These advance credits are an estimate and must be reconciled based on actual income when people file their taxes. People who received an overpayment of the premium tax credit (for example, due to an unexpected increase in income midyear) have to repay some of or the entire amount overpaid when they file their taxes. Conversely, people who received an underpayment of the tax credit may get a refund when reconciling their advance payments with their actual annual income and subsidy eligibility. There are several reasons that may cause people to need to reconcile their advance credits. The simplest is just that their income may change. Another is that there may be a change in the size of the family (e.g., birth, death, divorce), which affects the family’s income as a percent of poverty. People are encouraged to report these changes to the Marketplace so that their advance credit may be modified, but notification may not happen in all cases and even when midyear changes are reported, some reconciliation will likely occur when taxes are filed. In this brief, we focus on reconciliation based only on income changes (prior year v. current year), and estimate that 50% of subsidy-eligible tax households would owe some repayment and 45% would receive a refund. Subsidy-eligible tax households with starting incomes under 200% of poverty would be somewhat more likely to owe a repayment (54%) and somewhat less likely to receive a refund (40%). (Throughout this brief we define “subsidy-eligible tax households” as those households containing any individual who would have been determined eligible for advance payment of the premium tax credit based on their starting incomes). Among those projected to owe a repayment, the average repayment amounts would be $667 for taxpayers with starting incomes under 200% of poverty, $886 for taxpayers with starting incomes of 200-300% of poverty, and $1,380 for taxpayers with starting incomes of 300-400% of poverty. Among those projected to receive a refund, the average refund amounts would be $412 for taxpayers with starting incomes under 200% of poverty, $1,016 for taxpayers with starting incomes of 200-300% of poverty, and $1,601 for taxpayers with starting incomes of 300-400% of poverty. Overall, the estimated average repayment is $794 and the refund is $773.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
- Extent:
- 1 online resource (1 PDF file (12 pages, 1 unnumbered page))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101670446 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101670446