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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Are Cost-Sharing Reductions Refundable?

By on | 4 Comments

Question: Using my 2014 income projection, I will qualify for the enhanced silver plan. If the exchange uses my 2012 income, however, I will not qualify for that plan. If I’m not allowed the enhanced plan due to 2012 income, will my extra co-pays be refunded to me when I file my 2014 taxes?

Answer: Your estimated 2014 income is what counts in setting your initial subsidy eligibility. Your 2012 income is a benchmark. If those two numbers are significantly different, you will explain why. As for the cost-sharing reductions for which you may be eligible, there is no repayment nor refund at the end of the year. It is your responsibility to inform the exchange during the year if your income changes.

4 Comments

Max, you said, ” Any overpayment of tax credits received in 2014 has to be repaid to the federal government.”

Yet, not all advance over-paid subsidy received necessarily has to be returned, correct?

For a Family household which annually earns:

  • Less than 200% FPL, the amount of subsidy clawback is limited to a maximum of $600.
  • At least 200% but less than 300% FPL, the amount of subsidy clawback is limited to a maximum of $1,500.
  • At least 300% but less than 400% FPL, the amount of subsidy clawback is limited to a maximum of $2,500.

My advice to folks is to try to accurately estimate your 2014 income and completely forget about 2012 numbers (the only reason “2012” has ever been mentioned is that it is the only full 12-month period one has records for as a starting point). Additionally, for those who do not need 100% of the available tax credits, I recommend taking only about 2/3 in order to provide a cushion against being over-credited and having to repay money to the IRS.

May I add that subsidy eligibility will be based on your 2014 Modified Adjusted Gross Income (“MAGI”) and a good way to project MAGI is by referring to lines 37 and 8b on your most recent form 1040 and estimating what those amounts will total in 2014.

“will my extra co-pays be refunded to me when I file my 2014 taxes?”

The only thing which is “refundable” is any portion of unused premium tax credits. Cost-sharing is your “personal responsibility” when it comes to you health care expenses.

As for 2012 income, it was insane to lead people to believe that’s what their tax credits would be based on. Your 2014 tax credits will only be determinable when you file your 2014 income tax return in 2015. Any overpayment of tax credits received in 2014 has to be repaid to the federal government.

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