TAX TIP OF THE DAY... Obamacare enrollment for 2016
If you purchase health insurance from the Marketplace (Obamacare web site), you may receive a "subsidy". The amount of the subsidy is determined by how you answer certain questions during the application process... family size and income.
1) family size... only include household members that you are claiming on your tax return as dependents. Include dependents even if you are not purchasing Marketplace insurance for them.
2) income... they are referring to 2016 income.
3) income... generally, it's your prediction of 2016 adjusted gross income which is at the bottom of 1040 page 1.
4) you have the option to take any subsidy in advance (reduces each monthly premium) or to wait and get any subsidy with your 2016 tax return refund. Why would you wait? If you are uncertain as to your 2016 # of household members or 2016 income, you might want to wait to prevent from having to re-pay any excess subsidy erroneously given to you. I suggest taking the subsidy in advance due to a glitch in the repayment rules that could save you money.
5) settle up the subsidy with the 2016 tax return... the true amount of any subsidy is determined when you actually file your 2016 tax return. If they underpaid you, you get the rest with your refund. If they overpaid you, they deduct it from your refund.
The enrollment process is very frustrating to most people. It's a little like getting into a taxi and the taxi driver asks you to predict how many miles to your Baltimore airport destination. He makes you pay up front based upon your estimate. If your income is low enough, the taxi driver will discount your fare. Once you arrive at the airport, the taxi driver tells you how many miles he actually drove.... his taxi fare and discount now changes. So you have to settle up based upon the actual charge. Either you owe him or he owes you.
SHARE WITH A FRIEND.
If you need any help... www.baboiancpa.com