Claiming the ACA tax credit after paying full price for your health insurance

Most people know that there are premium tax credits (often referred to as premium subsidies) available for people who buy their health insurance through Connect for Health Colorado. But claiming the ACA tax credit as an advanced subsidy requires you to estimate your income for the coming year and supplying supporting documentation to verify that income estimate.

How to calculate ACA MAGI or “household income” for subsidies

Eligibility for premium tax credits extends up to 400% of the poverty level. For a single person applying for 2020 coverage, that’s $49,960 in income; for a family of four, it’s $103,000 (and the guidelines are fairly generous — you get to subtract pre-tax retirement plan contributions and HSA contributions when determining your income level).

Income eligibility for claiming the ACA tax credit.

But what if you’re not sure your income will end up being subsidy-eligible next year, and you just don’t feel like going through the financial eligibility part of the application? No worries, you can skip it! As long as you buy your plan through the exchange (we can help you do that), you’ll be able to claim your full premium tax credit on your tax return. That would mean you’d pay full price for your coverage throughout 2020, and if you do end up with a subsidy-eligible income, your premium tax credit will be added to your tax refund and/or subtracted from the amount you owe the IRS on your tax return.

Form 8962 (instructions here) is all about the premium tax credit, and it’s the form you’ll use (attached to your 1040) for claiming the ACA tax credit if you end up being eligible for it. This is the same form that people use to reconcile their subsidy when it was paid in advance to their insurance company throughout the year.

If you get your coverage through Connect for Health Colorado, they’ll send you a Form 1095-A after the end of the year. This form will have all of the information that you’ll use to complete Form 8962 and claim your premium subsidy.

So if you think you might be subsidy-eligible but don’t want to deal with the financial application or income verification on the front-end, you don’t need to worry that you’re leaving money on the table. You’ll still be able to get your full premium tax credit amount, after the fact, as long as you get your coverage through the exchange.

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