The Affordable Care Act (ACA) establishes various taxes on individuals and businesses. Additionally, a premium tax credit has also been instituted to make health insurance coverage more cost effective.
To qualify for a premium tax credit, an individual’s income must fall between 100-400% of the federal poverty level. Once they receive their premium tax credit, any excess may need to be returned when filing their taxes.
Premium Tax Credit
The Premium Tax Credit is a refundable subsidy that can help people who fall between 100% and 400% of federal poverty level afford marketplace health insurance plans, but who are either ineligible for other coverage (such as employer-sponsored plans), or cannot afford such plans without assistance. It is paid in advance and reconciled against actual income at tax time.
Eligibility for the Premium Tax Credit depends on projected income and household data submitted during open enrollment period to their healthcare marketplace. Any changes to circumstances should be reported promptly so their advance payments of premium tax credits can be adjusted appropriately; otherwise they could end up owing back some or all of these credits when filing their taxes in 2021; people who received too much advance credit should contact their marketplace and request reduction in monthly payments.
Taxes on Individuals
The Affordable Care Act (Obamacare) introduced numerous new and higher taxes for individuals and their families. These taxes include Individual Mandate and Employer Mandate taxes as well as tax credits that help lower-to-middle income Americans afford health care coverage.
The Premium Tax Credit or “Subsidy”, is a refundable tax credit designed to assist consumers who purchase marketplace health insurance plans through healthcare exchanges. You may claim it throughout the year to reduce monthly insurance costs or when filing your taxes to reduce overall bills or increase refunds; to qualify for this benefit, however, all income reporting and eligibility criteria must be fulfilled.
The Affordable Care Act also introduced an excise tax known as the Cadillac tax on high-cost employer-sponsored health plans, commonly referred to as Cadillac plans. Scheduled to go into effect in 2018, this excise tax applies only to plans with annual costs exceeding $10,200 for single coverage or $27,500 for family coverage; however, its implementation is currently on hold pending Supreme Court review of any disputes in this regard.
Taxes on Employers
The Affordable Care Act has created several changes to America and their families’ tax codes that impact them significantly, such as the Individual Mandate (requirement to purchase health insurance), Employer Mandate and Premium Tax Credit assistance for premium cost assistance. Certain life events may affect one’s eligibility for these Obamacare taxes and credits such as getting a job, having children or losing health insurance coverage.
These Obamacare taxes can have either an increase or decrease effect on America’s after-tax income depending on how they’re structured, with limits on deductions, an employer-sponsored health benefits tax over certain thresholds and medical loss ratio requirements requiring insurers to spend at least 80% of premium dollars on actual health care activities or else pay rebates back to consumers being examples of new or higher taxes that have come about under Obamacare. Most of these Obamacare taxes primarily impact high earners, large employers and the health care industry while tax credits tend to benefit low/middle income Americans as well as small businesses alike.
Taxes on Small Businesses
Prior to the ACA, many small-business owners were either uninsured or offered individual coverage that did not meet federal standards. Now, however, thanks to market regulations and subsidies under the ACA marketplaces and subsidies provisions of the law, many small-business owners and their families can access affordable health coverage options.
Under the Affordable Care Act (ACA), employers are mandated to offer health insurance or face penalties, but small businesses can qualify for tax credits to offset some of the costs of providing their employees with SHOP plans.
Obamacare also includes two taxes that private insurers must pay, which ultimately pass along as higher premiums to consumers. According to the Congressional Budget Office (JCT), these two Obamacare taxes raise family premiums by approximately $5,000 annually.
