NEW YORK (MainStreet)—Millions of Americans will soon become eligible for a new tax credit, the so-called health care subsidy, but many of them are not aware they may qualify for it.
Nearly 26 million Americans will qualify for the federal subsidy under the Affordable Care Act (ACA), according to Families USA, a nonprofit and nonpartisan consumer advocacy group. Its number crunching showed that a family of four with an income as high as $94,200 will be eligible for the government subsidy.
However, a Kaiser Family Foundation tracking poll in March found that only 62% of respondents were aware that the ACA provides subsidies to help low-income and moderate-income Americans to purchase health insurance on the new state exchanges. The Congressional Budget Office projects that there will be 7 million people enrolled in the exchanges in 2014. About 6 million of them will be receiving subsidies, according to the CBO.
Starting in October 2013, if your job-based health plan costs more than 9.5% of your annual income, or if your employer doesn't offer any health coverage, you are eligible to apply for a tax credit to help pay for health insurance purchased through an Affordable Insurance Exchange. The tax credit can be used at that time to lower your monthly premiums. You'll be able to see the amount of your tax credit when you submit your application. Once enrolled, you can control the amount of credit used to offset the cost of your premium. The subsidy will be sent directly to your insurance company.
Be aware, however, that the amount of the tax credit is based on your estimated annual income.
If your estimate is higher than your actual earnings, you may not receive the full amount of the subsidy for which you're eligible. If your estimate is lower than your actual income, you may have to pay back some or all of that money at the end of the year.
--S.Z. Berg is the author of College on the Cheap