ACA (Obamacare) Impact On Individuals Chapter 3 1 Premium Tax Credit (PTC) 2
3
Draft Form 8962
4
PTC Eligibility1) Purchase coverage on an
Exchange.
• In CA: “Covered California”
• 36 Other States: The Federal Exchange
• Any individual in your tax family purchases coverage on Exchange.
3-6
5
2) Have household income that falls between 100 percent and 400 percent of the federal poverty line for the family size.
6
Household Size
100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 15,510 20,628 23,265 31,020 46,530 62,040
3 19,530 25,975 29,295 39,060 58,590 78,120
4 23,550 31,322 35,325 47,100 70,650 94,200
5 27,570 36,668 41,355 55,140 82,710 110,280
6 31,590 42,015 47,385 63,180 94,770 126,360
7 35,610 47,361 53,415 71,220 106,830 142,440
8 39,630 52,708 59,445 79,260 118,890 158,520
For each additional person, add
$4,020 $5,347 $6,030 $8,040 $12,060 $16,080
2014 FLP Levels
7
Individual Market
Medicaid/Medical
PTCHI < 400% of FPL
HI > 100% of FPL
The Exchange
8
3) Are not able to get affordable coverage through an eligible employer health plan that provides minimum value.
9
But if an individual enrolls in the employer health insurance, then
no PTC even if it is unaffordable or lacks
minimum value
An employer-sponsored plan is “affordable” to taxpayer, spouse, and
dependents if employee cost
for self-only coverage does not exceed 9.5% of your household income.
10
11
4)Are not eligible for coverage through a government program, like Medicaid, Medi-Cal, Medicare, CHIP or TRICARE.
12
California Medicaid (Medi-Cal) Eligibility
HI % of FPL• Generally: 133%
• Children under 19: 261%
• Pregnant Women: 208%
13
MEC Eligibility Relief
Notice 2014-71 prevents a pregnant woman from losing eligibility for the PTC as a result of the pregnancy, merely because she is eligible for, but DOES NOT enroll in, the Medicaid or CHIP coverage:
14
No Similar ReliefFor a Child’sEligibility for
Medicaid
15
5) Cannot be claimed as a dependent by another person.
16
6) Do not file a Married Filing Separately (MFS) tax return with an exception for victims of domestic abuse and spousal abandonment who are allowed to claim the PTC using the MFS filing status.
17
Draft Form 8962
18
Three Possibilities
• PTC ($0 APTC) = Credit
• PTC > APTC = Net Credit
• APTC > PTC = Repay
21
Family of Three Facts
• H and W both age 35• CA ZIP 94506• One dependent child
(age 10) • File MFJ• Purchase a bronze plan
via Covered California
22
NoAdvance
PTC
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$4,848 PTC
$7,954 PTC
$2,460 PTC
24
H&W’s MAGI
Is $78,121
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC $0 PTC $78,121 400.0005%
26
Contribute $1to deductible
IRA by unextended due
date of Form 1040
$78,121 400.0005$0 PTC
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC
PTC $2,460
28
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 APTC
$2,460 PTC $0 PTC $78,121 400.0005%
Repay $7,954
30
Contribute $1to deductible IRA
PTC $2,460But….
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494?
32
No RepaymentLimit
AGI not Less Than 400%
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494
34
Contribute $2 (not $1)
to deductible IRA
PTC $2,460Plus $2,500 Limit
35
RepaymentLimit of $2,500
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,119 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $5,494$2,500
37
$2 IRA Contribution Saves $5,454
($7,954 - $2,500)
38
What if $5,001 is Contributed to IRA reducing actual HI to
$73,120(374% of FPL)
41
PTC $3,468APTC (Form 1095-A) -$7,954Excess APTC -$4,486
Repayment Limit is $2,500
Save $5,454 ($7,954 - $2,500)
Bigger PTC, but Smaller Excess APTC by Same Amount
42
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)
43
H&W’s MAGI
is $83,121
($5,001 over 400% of FPL)
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC $0 PTC $83,121
Repay $7,954
45
Now, a $5,002 IRA contribution
reduces HI to $78,119
(slightly below400%)
46
$5,002 IRA Contribution Saves $5,454
($7,954 - $2,500)
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,119 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $2,500
48
H&W’s MAGI
is $88,121
($10,001 over 400% of FPL)
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 PTC
$2,460 PTC $0 PTC $88,121
Repay $7,954
50
Now, a $10,002 IRA contribution
reduces HI to $78,119
(slightly below400%)
51
$10,002 IRA Contribution Saves $5,454
($7,954 - $2,500)
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,119 400%MAGI
P
$7,954 APTC
$2,460 PTC
Repay $2,500
53
New Facts:The Exchange Estimated their MAGI at $39,060
APTC$7,954
(Form 1095-A)
54
H&W’s MAGI
is $58,590
(300% of FPL)
P
PP
$19,530 100% of FPL
$39,060 200%
$58,590 300%
$78,120 400%
P
$4,848 PTC
$7,954 APTC
$2,460 PTC
Repay $3,106
Or $2,500
56
$1,500 RepaymentLimit
If AGI Less Than 300%
57
Contribute $1to deductible IRA
Save $1,000
Repayment Limited to $1,500
58
$1,500 RepaymentLimit
If AGI Less Than 300%
Print Out Two Tables For IRA
Planning
59
60
Household Size
100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 15,510 20,628 23,265 31,020 46,530 62,040
3 19,530 25,975 29,295 39,060 58,590 78,120
4 23,550 31,322 35,325 47,100 70,650 94,200
5 27,570 36,668 41,355 55,140 82,710 110,280
6 31,590 42,015 47,385 63,180 94,770 126,360
7 35,610 47,361 53,415 71,220 106,830 142,440
8 39,630 52,708 59,445 79,260 118,890 158,520
For each additional person, add
$4,020 $5,347 $6,030 $8,040 $12,060 $16,080
2014 FLP Levels
PTC =
63
1) SLCSP* minus contribution amount, or
2) If less, the premium paid*
*Exchange Provides on Form 1095-A
64
Family of Three Facts
• H and W both age 35• CA ZIP 94506• One dependent child
(age 10) • File MFJ• Purchase a bronze plan
via Covered California
65
• MAGI Projected in 2013 by Exchange is $58,590 (300% of FPL)
• Actual MAGI for 1014: $39,060 (200% of FPL)
CA ZIP 94506 For 35 Year Old Parents with
Child Age 10; AnnualLow 2nd
Lowest3rd.
Lowest
Bronze $8,376
Silver $10,140 $10,414
66
Purchased
Gross premium cost is driven by (1) coverage family size,
(2) age, and (3) location
67
SLCSP Annual Prem. $10,414
Exchange’s ComputationOf APTC
68
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $5,566APTC $4,848
*Tax Family HI of $58,590 x .0950 = $5,566
Exchange’s ComputationOf APTC
71
Form 1095-A Part III
MonthlySLCSP
For Coverage
Family
AnnualSLCSP
72
Form 1095-A Part III
MonthlyAPTC
AnnualAPTC
79
Tax Family
80
Draft Form 8962
3
H,W and Child. H&W have employer coverage so only child
coverage is purchased on the exchange. Still a tax family of 3
but a coverage family of 1.
81
Draft Form 8962
3
Line 3 = Household Income
Household Income = Modified AGI of Taxpayer
and Dependents
82
Draft Form 8962
3Line 2a: Your Modified AGI
AGI + excluded foreign earned income + tax exempt interest +
excluded social security benefits
83
3
Line 2b: Dependents Mod. AGI
84
So child’s part-time job only increases tax family HI if the
child is required to file Form 1040
85
Draft Form 8962
3$39,060 0Household Income: $39,060
86
3$39,060 0Household Income: $39,060
Line 4 = 100% of FPL
89
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
90
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
91
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%Is Line 5 less < 400%?
92
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
If Yes Continue to Line 7
93
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
If NO: No PTC and Pay Back APTC For ALL Individuls “in your tax family”
94
Modify Facts:• H,W and Child. All year, H&W
have employer coverage but child coverage is purchased on the exchange.
• If MAGI exceeds 400% of FPL, then pay back APTC for child whether or not the child filed a federal income tax return.
95
Possible Relief if over 400% of FPL
• If married in 2014
• If an APTC for an individual for whom another will claim the exemption
96
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
What if the % is under 100%?
97
Two Ways to Can Get PTC if Under 100% of FPL:
1)Marketplace estimated HI
between 100% and 400%
of FPL + APTC, but
Actual % is Below 100%
98
2)
Lawful NRA not EligibleFor Medicaid/Medi-Cal
99
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x
100
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x
“Applicable Figure” x HI on Line 5
101
Form 8962 Page 6Line 7 Applicable Figure
LL.0630
Higher HI % of FPL=
Higher Applicable Figure
102
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x200%
.0630
103
3$39,060 0Household Income: $39,060
x100% of FPL $19,530Line 5: HI as % of FPL 200%
x
Annual Contribution ÷ 12
104
3$39,060 0Household Income: $39,060
x100% of FPL $19,530
Line 5: HI as % of FPL 200%x
200%
.0630÷ 12 = $205 $39,060 x .0630 = $2,460
109
Form 1095-A Part III
All Part III Columns are filled-in with the
same amount each month
110
Form 8982 Monthly Calculation
111
Are Forms 1095-A Monthly Amounts the Samex
x
112
Are Forms 1095-A Monthly Amounts the Same
8,376
xx
115
Form 1095-A Part III
116
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $5,566APTC $4,848
*Tax Family HI of $58,590 x .0950 = $5,566
Exchange’s ComputationOf APTC
117
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460
xx
118
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954
xx
119
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954 7,954
xx
120
Are Forms 1095-A Monthly Amounts the Same
8,376 10,414 $2,460 7,954 7,954 4,848
x
2014 Form 1040
123
PTC > APTC =
Net refundable credit on Form 1040 Line 69
$3,106
124
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $2,460PTC $7,954APTC (Form 1095-A) -$4,848Net PTC $3,106
*$39,060 x .0630 = $2,460
Summary
125
Form 1095-A
126
The Monthly SLCSP
On Form 1095-AMay Not
Be Correct Due to Coverage Family
Changes ora Move
129
What if our Tax Family of Three
Becomesa
Coverage Family of
One?
130
Modified Facts:Same as above except, midyear,
H&W are covered by H’s employer insurance, so H&W’s Exchange
insurance is canceled July 1 but Child (C) is not covered by the
employer policy so C keeps his/her individual Marketplace Policy
Exchange Projected HI $58,590Actual HI of $39,060
131
The SLCSP Is Based Upon
the Coverage Family
of 1
132
Exchange Reports Coverage Family on
Form 1095-A, Part IIBeginning and Ending Dates
133
July through December
1) The monthly SLCSP shrinks from $868 to $177—based upon coverage family of ONE.
2) Projected tax family of three HI of $58,590 drives the monthly contribution amount: $404/mo.
134
3) The APTC is zero each month for July through Dec.
Monthly SLCSP $177
Monthly Contrib. Amt.* - $404Monthly APTC $0
*(Proj. HI of $58,590 x .0950) ÷12 = 404
Exchange’s ComputationOf APTC for Each Month
July through Dec.
136
Here, the Exchange was aware of the change because H&W’s Exchange coverage was canceled.
137
Form 1095-A Part III
$404$868JanThruJune
JulyThruDec.
$130
MonthlyPremium
$698
MonthlySLCSP
MonthlyAPTC
$177 $0
138
Form 8962 Part 2
Enter Monthly InfoFrom Form 1095-A
Monthly SLCSP $868
Monthly Contrib. Amt.* - $205Monthly Maximum PTC $663
Monthly PTC in Jan thru June
*(HI of $39,060 x .0630) ÷ 12 = $205
Monthly SLCSP $177
Monthly Contrib. Amt.* - $205Monthly Maximum PTC $0
Monthly PTC in July thru Dec.
*(HI of $39,060 x .0630) ÷ 12 = $205
141
($663 x 6 months) PTC = $3,978($404 x 6 months) APTC = $2,424
L 24 Exceeds L 25: Net PTC = $1,554
2014 Form 1040
142
PTC > APTC =
Net refundable credit on Form 1040 Line 69
$1,554
143
What if an employee with a new 2014 job and a tax family of 3
declines “affordable” (self-only) coverage, and purchases family coverage on the exchange, in
order to get the premium credit but does not tell the Exchange or IRS on Form 8962 about the
employer coverage.
144
Will the exchange or IRS know that none of the members of the family
qualified for the APTC or the PTC?
No Form 1095-B or C for2014
149
New FactsNo
AdvancePTC
150
H&W & C’s MAGI
Was Projected at $1,000,000 but they
purchased family health insurance on the
exchange
Family Net Worth $10 Mil.
151
Are they eligible for the PTC?
What will Form 1095-A Look
Like?
152
Form 1095-A Part IIINeither their premiums nor
their SLCSP are based upon HI.But no APTC
155
They unexpectedly have a $950,000 IRC
sec. 1231 loss dropping
2014 MAGI to $39,060
156
SLCSP Annual Prem. $10,414
Annual Contrib. Amt.* - $2,460PTC $7,954APTC (Form 1095-A) -$0Net Refundable PTC $7,954
*$39,060 x .0630 = $2,460
Form 8982 Summary
161
Premium $15,000
Gary’s SLCSP is $12,000 (for 3)
Jim’s SLCSP is $6,000 (for 1)
162
Gary
Jim’s SSN
.67
163
Part 5:Alternate
Calculation For Year of Marriage
164
Allows the couple to use ½ their HI in pre-marriage
months
165
Rev. Proc. 2014-41 (July 25, 2014)
Self-Employed Health Insurance
Deduction and PTC
3-52
166
Guidance on and examples of the
calculation methods a taxpayer may use to resolve the circular
relationship between the IRC sec. 162(l)
deduction and the PTC.