HELENA – If you want federal subsidies to offset the cost of health insurance you buy under “Obamacare,” you must tell the government your estimated income for 2014.
But what happens if you guess wrong?
If you’re off just a bit, it shouldn’t make that much difference. But if you lowball it by a bundle, you could end up having to pay back most or all of those subsidies.
Here’s how it works: If you go online at Montana’s health insurance “marketplace” after Oct. 1 to shop for a policy, you’ll be asked to submit your estimated “modified adjusted gross income” for 2014.
For most people, MAGI will be their estimated wages, interest and dividend income – generally, all taxable income. It also includes non-taxable Social Security benefits and some pension and annuity payments.
That MAGI amount will help determine if you’re eligible for a subsidy and how much that subsidy will be. For those on the lower-income scales, the subsidy could be substantial.
The feds will be checking some income submissions, to see if they’re wildly different than your last reported income. But you’re pretty much on the honor system when it comes to reporting your MAGI.
However, the estimated income you claim will be checked against your actual income when you file your 2014 federal income tax return. If you earned more than you estimated, and you got a subsidy for your health insurance, you may have to pay back some of the subsidy.
The maximum amount of payback is tied to your actual 2014 income. If you earn anywhere from 100 percent to 199 percent of the federal poverty level, your maximum payback is $300 for an individual and $600 for a family.
The maximum payback rises gradually to $1,250 for an individual and $2,500 for a family for those earning 300 percent to 399 percent of the poverty level, and, for those at 400 percent of poverty and higher, you must pay back all of the overpayment.
So, if you estimate your 2014 income at a lowly $15,000 and thus get a substantial subsidy to offset your insurance policy, and you get a much better job in 2014 or have a big capital gain and your income soars – be prepared pay back that subsidy.