How Your Tax Return Impacts ACA Health Insurance Enrollment

When you enroll in a health insurance plan under the Affordable Care Act (also called Obamacare), it’s important to understand that the premium you will pay for your health insurance is directly tied to your taxable income each year. In this article, I’ll explain what the tax implications of the Affordable Care Act (ACA) mean for you and your family. 

How Estimated Income vs Actual Income Can Affect Your Tax Return

When you signed up for ACA health insurance in 2022, you gave the government an estimate of what you thought your taxable income would be for that year. Based on that estimated income, you received subsidies or credit on your health insurance premiums, which is a benefit of the ACA. 

When you file your taxes for 2022, your tax return will be the declaration of your actual income. If your actual income turns out to be higher than your estimate, you may owe money to the government. That happens very frequently. Conversely, if your estimated income was too high and your actual income was lower, then you may get a refund on your tax return. It’s important to know that your tax bill or refund will be debited or credited by the IRS when you file your taxes.

This Year’s Actual Income Is Separate from Next Year’s Estimated Income

When you file your taxes, you also need to make income estimates to renew your ACA health insurance plan for next year. For 2023, the income you reported in 2022 has no meaning. You’re back to estimating what you think you’ll make as income in 2023. This estimated income will determine your premium and any benefits you can receive. 

But remember that whatever you estimate as your 2023 income will affect your taxes the following year. That’s an important factor to be aware of when you apply for ACA coverage.

Strategies for Estimating Income on ACA Enrollment

If you are the type of person who enjoys planning ahead, you may not want to give your actual estimated income when you enroll for ACA health insurance for 2023. There are strategic times when you may want to estimate a lower or higher income to change your premiums and benefits.

For example, you may report a higher income because it will make your premiums a little higher, but it will also most likely result in a refund when you file your income taxes the next year. Or you may report a lower income, which will make your premiums a little lower each month, if you prefer to get your tax refund as close to zero as possible. You should carefully consider this strategy, however, so that you don’t end up owing money to the government when you file your taxes the next year.

That’s what MBhealth is here to do: We consult with you on your finances and health insurance needs to come up with the best strategy for your family. We can help you determine if it makes more sense for you to get more or fewer benefits for 2023, and we’ll walk you through the strategy so you’re prepared for ACA enrollment.

Important Information for Special Enrollment Periods

As part of your strategic plan, it’s important to consider whether or not you may have any significant life events in 2023 that would make you eligible for a special enrollment period. For example, if you gain a new dependent (through birth or marriage), you would qualify for a special enrollment period where you can make changes to your ACA insurance plan.

However, there are certain other life events to consider when enrolling in ACA coverage that may impact your strategy because they do not qualify you for a special enrollment period. These events can include losing or gaining a job or losing a dependent (due to them moving out of the home or turning 26). If you know an event like this might happen in 2023, our consultants can help you determine the best strategy to use when enrolling in your ACA health insurance.

Contact MBhealth for Assistance with Affordable Care Act Enrollment

My company, MBhealth Insurance Agency in Affton, MO, is here to help you plan the best strategy for your health insurance needs. If you have any questions, or if you want to schedule a consultation to go over your specific situation, we’d be happy to follow up with you. Call or text me at 314-544-5400 or visit our contact page to get in touch.

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