Health Care Reform Subsidies Are Considered a Tax Credit and Taxable Income

Yeah Scott, we discussed this and I'm sticking with my "no" answer on this.

Here's the question in a nutshell: If a family of 4 is getting a $500 per month subsidy, will they owe income taxes on that amount - or $6,000 in this example.

My answer? No, they won't. However, no on really seems to able to find a clear "yes or no" answer. My wife does tax prep for Jackson Hewitt and backs me up - that a tax credit (in this case, subsidy) cannot be taxed as income 'cause it's not income. It doesn't even come close to meeting the definition of income.

Beyond that, the "poorest" people will qualify for the largest subsidy therefore the largest tax bill? Doesn't make any sense. If true, this will be a global nuclear explosion come tax time as people earning 200% FPL find out they owe taxes on the subsidy.
 
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Yep - see it. It's my opinion that it's false. The really good news is the government probably doesn't even know. You know, how many have actually read the bill?

No one's going to know for sure until 2015. Tax credits won't start until Jan. 2014 which people won't get hit, or not get hit with this potential tax until they file in 2015. So likely it'll be a full year of "well, no one really knows."

I'll still maintain that a tax credit cannot be treated as income. My wife does tax prep and agrees. Someone might want to hit up a CPA if they know one.

One thing is for sure - it'll certainly be interesting for a family of 6 who earns 150% of FPL to get hit with a tax bill based on possibly 10K or more of subsidies that everyone knows they can't possibly pay.
 
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No one's going to know for sure until 2015. Tax credits won't start until Jan. 2014 which people won't get hit, or not get hit with this potential tax until they file in 2015. So likely it'll be a full year of "well, no one really knows."

hummmmmmm,,,,,,maybe this is what the Blues are referring to......


Health-Care-Reform-Subsidies---Tax-Credits

[FONT=Helvetica, Arial, sans-serif]However, individuals who receive these subsidies / advanced tax credits must remember to update financial information throughout the year as well as changes in family size. Tax credit qualification amounts may be adjusted, meaning you may qualify for more of a tax credit or your tax credit may be reduced. If not adjusted during the year you may end up with a sizeable tax bill to the IRS at tax time.





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hummmmmmm,,,,,,maybe this is what the Blues are referring to......

Health-Care-Reform-Subsidies---Tax-Credits

However, individuals who receive these subsidies / advanced tax credits must remember to update financial information throughout the year as well as changes in family size. Tax credit qualification amounts may be adjusted, meaning you may qualify for more of a tax credit or your tax credit may be reduced. If not adjusted during the year you may end up with a sizeable tax bill to the IRS at tax time.

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That has nothing to do with the subsidy as taxable income. They're just stating that if your income goes up then you need to update that since you get less of a subsidy.

If you fail to adjust your income and you end up taking more than you qualify for then you'll owe it.
 
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That has nothing to do with the subsidy as taxable income. They're just stating that if your income goes up then you need to update that since you get less of a subsidy.

If you fail to adjust your income and you end up taking more than you qualify for then you'll owe it.

yea I know....it is strange .....how can these sites claim this.....
 
That has nothing to do with the subsidy as taxable income. They're just stating that if your income goes up then you need to update that since you get less of a subsidy.

If you fail to adjust your income and you end up taking more than you qualify for then you'll owe it.

Hang on just a second there. If they take more subsidy than eligible for up to 400% of fpl they don't owe all of it back, so they may count the difference as income...I'm thinking...maybe..
 
Instead of blindly trusting 3rd parties who are not tax experts.... why not go directly to the source?

And lets use some common sense here people.... those bc/bs sites are all from the same template.... so one initial error was just replicated over and over by people who again, are not tax experts.... :no:


The IRS says that it is an income based tax credit.

The link even explains in very simple language how the credit effects your taxes at the end of the year....

You can choose to estimate it for the year and have it reduce your premiums. (and settle up at the end of the year)
Or you can choose to pay full price for coverage and just let whatever Credit your eligible for reduce your year end tax liability.

According to the IRS it is not taxable income. Like many insurance companies have in the past, bc/bs just made a typographical error. Albeit a very large typographical error.... but a typo nonetheless. The IRS makes absolutely no mention of the credit being taxable income in any way. They actually say the opposite.
 
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