ACA family glitch and marketplace premium tax credits
I'm self-employed/semi-retired (61). My husband has health insurance through his employer and I had insurance through the state marketplace (CO) for 2023. I'm 99% certain that I qualify for a premium tax credit this year thanks to the family glitch changes, and FreeTaxUSA seems to agree, adding it to our expected refund.
But - there doesn't seem to be a place to enter the the amount that would be deducted from his paycheck for individual versus family premiums. Maybe I'm being silly, but it's stressing me out that the software is taking for granted that I qualify for the credit based on numbers it doesn't have.
How does it know his premium cost is higher than the 9.12% threshold for percent of income? Is there a form I've skipped over? It's not on my 1095-A of course, and the 1095-B just says he had insurance all year. Does his employer have to tell the IRS those figures and they'll double check when it's filed? (Am I overthinking this? LOL I just don't want to have to pay it back later if I'm wrong.)
Also, as long as I'm here, the calculators I've played with both say to enter the premium he'd have had withheld for 'family', is that accurate or should it be the 'employee + spouse' premium since there's only two of us? Asking because while I qualify either way for 2023, if it's based on the higher 'family' premium amount, I'd have room to take my 401K $ in 2024.
Thanks!
Answers
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Hi Mishadog,
This is a great question for the community, so I want to address a few things about the Premium Tax Credit (PTC) with Self-employment and how the PTC is calculated. With that said, you may want to contact FreeTaxUSA support to have them look at your account so they can specifically address your situation.
One thing to keep in mind, is the PTC is based on your joint income. If your total joint income, exceeds the PTC threshold on the Form 8962. For example, the poverty line for a family of 2 is $18,310 and your income is 400% or more of the poverty line, then your contribution amount goes up and your PTC will go down.
Also, if you are going to deduct your premiums for self-employed health insurance, you must calculate an allocated amount of the premium you pay. We have instructions for an alternative calculation, since the IRS does not allow you to get a PTC and take a full deduction of the premiums you paid. Basically, that would be like double dipping, since the government pays for part of your premium.
Just keep in mind that the greater your household income the less PTC you can qualify for.
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I do appreciate the thorough explanation, though our overall income is not the part that concerns me. My fault for the long-winded post, trying to get in all the details just made it confusing. The total AGI for both of us is ~300% of poverty level, that's not an issue. And I hadn't planned on deducting my insurance from my self-employment income because, as you said, no double-dipping.
Income is only part of it though, the second part is whether or not his employer-sponsored coverage is affordable. What's confusing me is how they calculate that — none of the forms ask how much the employer would charge us for employee+family coverage. For 2023, it's not considered affordable if it's more than 9.12% of AGI. Our cost would have been over that, so I qualify there as well. But it worries me that there's nowhere that they actually ask for the numbers to calculate that. (I mean, how do they know? And what if I'm wrong even though I know I'm not wrong? LOL)
I couldn't find anything on the IRS website, either, so I'll go ahead and file and see if they ask for more information. (There's a form 14950 they might send asking for proof that I qualify for the credit, but even it doesn't mention the cost through the employer.) Thanks again for your help!
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Hi Mishadog.
You are welcome.
That is a good point about the affordable coverage relating to the 9.12% of AGI. However, the tax form 8962, is used to reconcile the Premium Tax Credit and that's about it when it comes to filing your tax return. All the other considerations, as far as I understand, for it being affordable are done through HealthCare.gov. However, I do see your point.
