Here's What Obamacare Might Do to Your Tax Refund

Whether you're in favor of health care reform or not, Obamacare is here, and it has tax implications. If you don't take a little time to learn more about them, you might be in for some surprises come tax time next year. (The Affordable Care Act, also known as Obamacare, took effect in 2014, so it will affect taxes for this year, which most of us will address and pay in 2015.)

More than 4.2 million Americans have signed up for health insurance through the newly available Obamacare exchanges. It's estimated that about 83% of those signing up are eligible for federal subsidies that can lower their premiums and health-care costs. That's good news for many people, but it also means their taxes might be a bit more complicated.

Nuts and bolts
According to the law, those who are younger than 65 and not eligible for health care coverage through their employer or Medicare can apply for tax-credit subsidies through their state's health care exchanges. The subsidies are meant to assist those with low to moderate income levels, applying to those earnings between 100% and 400% of the federal poverty level. In 2014, that's $11,670 to $46,680 for individuals or $23,850 to $95,400 for a family of four. 

You can learn about your eligibility for financial assistance through the enrollment process. At your state's health care exchange, you can enter information about yourself, such as your income and employment. If it's determined that you qualify for some level of financial assistance, you won't have to wait long for it. It's factored into the premiums you pay to your insurance company throughout the year, lowering them. Eligible folks are also assisted with out-of-pocket medical expenses and can also get a financial break through cost-sharing. If you earn between 100% and 250% of the poverty level, you'll pay just 6% to 27% of your medical costs, while the remaining 73% to 94% is covered for you.

That all might sound simple enough, but the subsidies are based on estimates. Your situation may have changed by the end of the year. As Nina Olson, our National Taxpayer Advocate, has explained, your subsidy "could increase if you have another child and you want to be able to get the benefit of that," and it could decrease "if you have a significant pay increase, if your spouse gets a job, if a child is no longer covered on your plan."

Keep current
The exact amount of your ultimate Obamacare-related credit for 2014 won't be clear until you prepare your tax return in early 2015. For many people, that will be no problem. If they paid too much, their refund will be larger. If they owe more, their refund will simply be smaller than they might have expected -- or they may owe more in taxes. For some people, though, suddenly owing more or not getting the refund they had planned to get can be a big deal. Thus Olson offers this guidance: Keep your personal information in your health care exchange up to date. If you have a relevant financial or life change, go into the exchange and enter the new information so that your subsidy is being calculated according to the most accurate information.

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Read/Post Comments (22) | Recommend This Article (18)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 15, 2014, at 2:56 PM, sig220mw wrote:

    I just love how Mr. Obama has made our lives so much simpler.

  • Report this Comment On March 15, 2014, at 3:23 PM, SLTom992 wrote:

    It's certainly going to be funny when the Liberals find out that robbing the rich to give to the poor have labeled themselves "rich" because they make minimum wages and pay no rent living with their parents.

  • Report this Comment On March 15, 2014, at 3:25 PM, barrydyer wrote:

    Glad we white seniors voted Obama over the rep. how silly rep. are . glad to see we have ins. for ave and poor Americans now..

  • Report this Comment On March 15, 2014, at 3:38 PM, jnkbck wrote:

    when Obama stops changing the rules of Obamacare...he's now exempted the individual how will this effect my refund?

  • Report this Comment On March 15, 2014, at 3:50 PM, SLTom992 wrote:

    Without a doubt Obama-care will go down in history as the worst piece if legislation ever. Worse than prohibition by miles.

  • Report this Comment On March 15, 2014, at 4:04 PM, smilingdon wrote:

    What Obama giveth, Obama takes back double!

  • Report this Comment On March 15, 2014, at 6:38 PM, Acttorneyatliar wrote:

    "As Nina Olson, our National Taxpayer Advocate, has explained, your subsidy 'could increase if you have another child and you want to be able to get the benefit of that,' and it could decrease 'if you have a significant pay increase, if your spouse gets a job, if a child is no longer covered on your plan.' . . ." Gee, look what Obumblecare encourages; having more babies so that you can suck ever harder on the taxpayers' teats, and avoiding ambitiousness and the resulting increased incomes so as not to decrease the size of the taxpayer teat from which the user sucks. This is liberal/socialist brilliance at its best!

  • Report this Comment On March 15, 2014, at 6:53 PM, dirtywhiteboyiiz wrote:

    "subsidies" waivers etc

    means more pain for the middle class

    and with the "hardship" rule

    all one has to do is show they are on welfare and they dont have to pay


    and you can keep our doctor :)

  • Report this Comment On March 15, 2014, at 7:14 PM, akey1954 wrote:

    So will pay for it all? I've paid all my life for generations of deadbeats and wannabes for the Dems votes. Bet it will not be Obama and Harry Reid and the likes. Sorry, I think, I'll just pass and simply drop out! The Feds have screwed me enough !!!! Come and try to get it!

  • Report this Comment On March 15, 2014, at 7:53 PM, JImbojoker wrote:

    The theme song for articles here should be "The Hook"

    " It doesn't matter what I say

    So long as I sing with inflection

    That makes you feel that I'll convey

    Some inner truth of vast reflection

    But I've said nothing so far

    And I can keep it up for as long as it takes

    And it don't matter who you are

    If I'm doing my job then it's your resolve that breaks

    Because the hook brings you back

    I ain't tellin' you no lie

    The hook brings you back

    On that you can rely"

  • Report this Comment On March 15, 2014, at 8:54 PM, towens2921 wrote:

    What is a tax refund?

  • Report this Comment On March 15, 2014, at 9:11 PM, piasabird wrote:

    I am going to take my chance and hope for the best. My wife just cant afford healthcare and I get mine from my employer.

  • Report this Comment On March 15, 2014, at 10:45 PM, jimwilson81 wrote:

    Why would anybody be surprised by this? It is typical and predictable.

  • Report this Comment On March 15, 2014, at 10:55 PM, emrey wrote:

    In the working days of my life, I always figured the tax withholding so that at the end of the year, I owed the IRS around a hundered dollars. Never did get a "tax refund". Just enjoyed a little more on my paycheck every payday. People will learn to do that if ACA isn't ousted by the incoming president in 2016. One never knows, does one. Also obama may change the rules again and again and again. Is this changeing the rules in the middle of the game really legal? Or is obama just showing his ignorance?

  • Report this Comment On March 16, 2014, at 12:53 AM, DevonShire123 wrote:

    What Obamacare will do to your tax refund? Uhh, STEAL IT. Duh!

  • Report this Comment On March 16, 2014, at 1:38 AM, buffrat wrote:

    They fail to say that the only recourse to the government to obtain penalties is through a deduction in your refund or a withdrawl from your bank account. If you prepare your W-4 correctly you can make your taxes a 0 sum game. No refund, no additional taxes, And if you go to strictly cash, there's no bank account! And you know what they say; you can't get blood out of a turnip!

  • Report this Comment On March 16, 2014, at 2:26 AM, thecarnivore123 wrote:

    My only question is why does the Motley Fool ruin its own reputation by continuing to prop up this law? This is not helping your credibility!!!

  • Report this Comment On March 16, 2014, at 3:01 AM, MACKABACK wrote:

    Most of the objection to Obamacare is driven by ideology and lack of economic good sense. From the standpoint of the free market, once you bring more people into a market place, all stakeholders stand to gain.

    Consumer health care cost will fall because there will be great cost sharing. Secondly, the investors, as owners of health care institution will have a larger market base and by this rule, more potentials to make profit.

    The problem we face is that the traditional mindset is to focus on keeping a very narrow health care market and milk it for as much money as possible. Of course, the botched roll out served to titilate the naysayers, but in the final analysis, the overall altruistic motive of Obamacare will be demonstrated by its ability to provide quality healthcare to more individuals at lower prices.

    In a market driven economy, this is a desirable outcome. It is also a first principle of Adam Smith's "Wealth of Nations." To paraphrase, ' it is not for the good of all that the health industry serve society, but it is merely to pursue their own narrow self-interest.'Therefore, it is not enough to speak about a "free market." One must have a profound understanding of what are its policy implications. And here, the policy implication of Obamacare, at the end of the day, is an optimum outcome, wherein the majority of people are happy with have good health care at a reasonable price.

  • Report this Comment On March 16, 2014, at 3:02 AM, TerryFlowers wrote:

    HR 676 = Healthcare Equality

    The Affordable Care Ace (ACA) or Obamacare is not the solution to our nation's healthcare challenges. Neither the Republicans nor the Democrats seem to have any real answers. Healthcare costs have been spiraling out of control for over three decades and something has to be done before it gets to the point that very few of us will be able to afford medical care. ACA may have slowed the rise in healthcare costs but it continues to rise faster than the rest of the economy.

    The only real solution for our nation is to remove the profit from the bottom line. All too often it is the patient that suffers as profit becomes the priority.

    HR 676 is a single-payer, true universal healthcare plan. It would leave the medical providers as the owners and operators of their practices in the private sector as not-for-profit entities. It would eliminate the need for the for-profit healthcare insurance industry. The program would be paid for by increasing the Mediare tax to 4.5% (would be less than what most of us pay in insurance premiums now). Businesses would see their taxes rise as well (again would be less than what they pay out in employee healhtcare benefits currently).

    HR 676 wouild provide comprehensive medical care at no cost to the patient and would include medical, dental and vision. No co-pays, no deductibles, no out-of-pocket medical expenses. This would eliminate the bankruptcies and foreclosures that are the result of medical bills.

    HR 676, sometimes referred to as Improved and Expanded Medicare for All, would usher in true healthcare freedom, equality and justice. Research it for yourself. There are a number of excellent web sites that have a wealth of information. www . pnhp . org and www . healthcare-now . org and www . mforall .org are some of my favorites.

  • Report this Comment On March 16, 2014, at 7:06 AM, skypilot2005 wrote:

    On March 16, 2014, at 3:01 AM, MACKABACK wrote:

    “From the standpoint of the free market, ….”

    Using Obama Care and “free market” together shows a complete ignorance of the social science of economics. I. M. O.


    Obamacare's problem: You can't fix stupid


  • Report this Comment On March 16, 2014, at 1:58 PM, PaulSell wrote:

    Barry was asked for a comment about the phu*ked up numbers around the deadline and he just burst into the song, ♪♫Don't Worry, Be Happy... ♪♫ Recently when asked specifically about all the "cooking of the books" on OB☭M☭C☭RE ● & enrollment numbers & the CBO job loss report, Kathleen Sebelius, (AKA Mrs. Bagdad Bob), smiled and said, "Pull my finger." When the exact question was also posed to Barry, he tucked in his chin and gave a big toothy smile and said, "I just love that Yahoo picture of me with the Great Seal behind my pointy head, that looks like a halo on me. In addition I just want you all to know, I have a Bic Pen and an Obamaphone."

  • Report this Comment On March 17, 2014, at 1:50 AM, savior wrote:

    It'll proably sound something like…..

    "If you like you income tax refund you can keep it"…

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Selena Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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