On January 1, 2014 every single American will be expected to have a current health insurance plan. Anyone who chooses to not purchase a health insurance policy will be subjected to a steep tax penalty. For people who are self-employed or unemployed, this sounds like a nightmare. If your employer doesn’t pick up the tab, you’ll be forced to dig into your own pockets to come up with the money needed to purchase the insurance plan, or face some steep tax penalties.
Government Tax Credits Help Offset the Cost of Health Insurance
Believe it or not, the government does understand that the main reason so many people don’t currently have health insurance is because they can’t afford it, and that having to come up with a monthly insurance premium could be more than your budget can handle, especially if an unexpected expense comes up. Subsidies have been created which could ease your burden and make it possible to be properly insured. It’s estimated that approximately 26 million people will have no trouble qualifying for these subsidies.
The subsidies have been included in a piece of legislation called the Affordable Care Act (ACA). It was created for those in a low or middle income bracket who simply don’t have much extra money that they can spare for a monthly insurance premium. The subsidies come in the form of tax credits and can be used for state run insurance programs.
How the Tax Credits will be Determined
Families of four will be eligible for credits if the total family income stays below $94,200, but it’ll vary based on your state, age, whether or not you smoke, and income. The subsidies can only be used to get a discount on Bronze and Silver health plans. Use our tax credit calculator to see an estimate of your tax credit.
What the Tax Credits Apply To
Qualifying for one of the government tax credit will make your health insurance more affordable by helping out with the monthly payments, but that will be the only assistance you’ll receive. Even though you qualify for the health insurance subsidy, you will still have to pay the same amount for office calls, emergency care, and you might still have a high deductible.
How to Receive Tax Credits
Tax Credits are determined when you apply for insurance through the Health Care Marketplace. Once your credit amount is determined, you can decide whether you want it paid in advance or at the end of the year as a tax credit. If you choose to receive it in advance, the government will automatically pay the subsidy share of your insurance premium each month to the insurance company. You will be responsible for paying the remainder of your premium each month.
Still need more help? Check out our article on the best ways to get a tax credit.
Sources:
http://kff.org/interactive/subsidy-calculator/
http://blogs.kqed.org/stateofhealth/2013/07/24/no-wonk-how-obamacare-subsidies-work-for-consumers/