If you got subsidized health insurance in 2014, there’s a 95 percent chance that you’ll get a surprise when you file taxes. And the good news/bad news odds are roughly even.
That’s the upshot of a Kaiser Family Foundation report analyzing what tax filing is likely to bring for people who got aid through the Affordable Care Act. Last year was the first time people could get federal help buying policies on the federal exchange. Now it’s time to report what they earned, match it against their estimate and settle up with Uncle Sam.
Because the subsidies are tax credits paid in advance to the insurance company, the IRS collects from people who got too much and refunds money to those who got too little.
“Many people’s income fluctuates throughout the year: the income of hourly workers can change as the number of hours worked varies, and even salaried workers with more stable earnings can receive bonus payments that increase their income,” the Kaiser report says. “Changes in circumstances, such as job loss or job gain, can also alter income from what may have been used to determine the advance payments.
The foundation estimates that 50 percent of people who got subsidies will owe money and 45 percent will have some coming back. The estimated average repayment is $794, and the average refund is pegged at $773.
“These findings are similar to reports from tax preparers Jackson Hewitt and H&R Block of the experiences of early tax households, which respectively have reported that 53 percent and 52 percent of their early filing clients have been required to issue a repayment,” the report says.
That makes for a lot of tax turmoil in North Carolina, where more than 300,000 people qualified for subsidized insurance last year. For 2015 the number topped 500,000.
The biggest bills will go to people who got subsidies but ended up above the cutoff of 400 percent of the poverty level, $79,160 for a family of three. They’ll have to repay everything they got.
People whose income turns out to be lower than 100 percent of the poverty level, or $19,790 for a family of three, don’t qualify for subsidies either, but they don’t have to repay what they got.
Some of the shock may abate as people get more familiar with the program and report income changes during the year. But the prospect of losing an anticipated tax refund, or even having to write the government a check, may create problems for the low-income people who are supposed to get health care through the act. “To the extent people are uncertain about how much of a subsidy they will ultimately qualify for,” the report concludes, “they may be more hesitant to sign up for insurance.”