What is a Health Care Subsidy?

Health Care

Under the new health care law, otherwise known as Obamacare, most Americans will be required to have health insurance starting in 2014.

So what does that mean to you? If you already have health insurance through your employer, not much will change.

But what if you don’t have insurance? To help pay for the cost of health insurance, you may be eligible for financial assistance from the government, called a subsidy.

What is a subsidy?

A health care subsidy is financial assistance from the government that you could be eligible for to help you pay for health insurance. Your eligibility is generally determined by your household income and family size.  To see if you’re eligible for a subsidy, check out this health care calculator.

Quick Tip:  Even though the IRS will report your income to exchanges for you,  if you used TurboTax to prepare your taxes, you can look up your 2012 income on your tax return by logging into My TurboTax or looking at your saved PDF file.

How to apply for your subsidy?

You  can apply for your subsidy when you purchase health insurance through online federal or state health care marketplaces.  The name of the online health care marketplaces are different in each state.  To look up the name of the Marketplace in your state, click here.

How does the subsidy work?

The subsidy will go directly to your health insurance provider when you purchase insurance to lower your monthly health insurance payments or premiums.

Have specific questions about how this impacts you?  Ask them below or get health care reform answers in our TurboTax community.



Comments (29) Leave your comment

  1. What if I don’t remember what I used as my estimated income for 2014? Will turbotax know how to calculate that based on the subsidy I received? I cannot find my estimate on the healthcare.gov website

    1. I found the answer: The Marketplace will send you an information statement showing the amount of your premiums and advance credit payments by January 31 of the year following the year of coverage. For example, you will receive the 2014 information statement by Jan. 31, 2015, and can use this information to compute your premium tax credit on your 2014 tax return and to reconcile the advance credit payments made on your behalf with the amount of the actual premium tax credit.

  2. Will this “subsidy” affect my tax refund? In other words, will my usual refund be applied to pay back this reduction in my premium? The Internet form was unclear when it said I would receive zero tax credit. Does that mean I’ll lose my tax exemption or just that I won’t have the credit for buying insurance?

    1. Hi,
      The subsidy or tax credit will not impact your tax refund. The only time it may be impacted is if you estimate your income lower and receive a bigger tax credit to pay your insurance than you should have then you would have to pay some of it back on your 2014 taxes when you file in 2015. When the calculator said you would receive zero tax credit that means the estimate finds you were not eligible to receive a tax credit.
      Thank you,
      Lisa Greene-Lewis

  3. My mother is receiving SS disability but is not currently signed up with medicare part b. Does she need to go through medicare part b or can she sign up for a subsidy?

  4. I am 60 YOA my wife is 67 and on Medicare how do configure my entries for the subsidy tools? most will not calculate because she is over 65 and I do not know what income to put down only mine or both. Oh I am disabled medical. HELP

  5. I am a retired city worker with a sole proprietorship business, as well as a pastor. I assume my MAGI is the same as my AGI on line 37 of my 1040 form, which was $50, 716 last year. According to the Kaiser Family Foundation calculator, since I have to purchase from my salary all my family coverage then I am allowed a $5239 per year subsidy which would cut my Blue Cross insurance premium in half. I still cannot set up an account on the healthcare.gov site. Very frustrating! I guess we all have to “predict” what line 37 on 1040 will be a year in advance from now on to get a subsidy….and hope we are correct?

  6. I thought I had read in the healthcare.gov’s website regarding the subsidy that you would get the assistance immediately toward your premium as stated above however: I alos am sure that I read that if you were due a tax refund at the end of the year, that this “assistance” would be taken against your return. Is this true?

    1. That’s what I’d like to know, because the plan I got is worthless, it doesn’t cover anything in reality and if I’m losing my $2000 refund to pay for this garbage plan, I’ll be pretty upset.

  7. Our family income is from an LLC owned by my wife and me. We currently buy our own health insurance. Do I have to buy insurance through the Marketplace to qualify for the subsidy or can I continue with my current insurance and qualify?

  8. I know that you can get the subsidy if you “do not make too much”, but my question is, can you get the subsidy if “you do not make anything, or below the poverty line”. I am unemployed, but i am sure i do not qualify for medicaid since my net worth (i am guessing) would preclude that, so is the also a MINIMUM AGI to qualify for the Obamacare subsidy?

    1. Andy,

      Qualification for expanded Medicaid under the ACA is *not* means tested. If your household MAGI (Modified Adjusted Gross Income) is less than 130% of the Federal poverty level, then you will qualify for Medicaid, that’s *IF* you live in a state that has agreed to expand Medicaid under the ACA. You can learn what you’ll qualify for by going to the health insurance exchange for your state. Start here: https://www.healthcare.gov

  9. I am not employed, but I have rental income. To qualify for the no cost or low cost. Do they base it on my gross rental income or adjusted income when putting the figure into the calculator? Or do I qualify because I am not employed?

  10. It is my understanding that if the annual premium I pay through my employer is more than 9.5% of my annual income, I may be eligible for tax credit. 9.5% of my annual income is $1568; my annual premium I pay through my employer is $3900. Do I qualify for help?

  11. My husband and I are both retired. He has just started Medicare, so I had to find insurance for myself. The option I took was to purchase Continuing Cobra insurance from his former employer, at a cost TRIPLE to what we paid for family coverage! All my expenses are out of pocket now until I am on Medicar in 38 months. Would I be able to qualify for a subsidy?
    Thank you,
    Sue Smith

  12. What about the single parents that have insurance thru there employers and premiums are deducted from pay? Will we qualify for assistance to help pay our premiums?

    1. Hi Norma,
      If you have employer provided insurance you are not eligible for a subsidy unless your employer provided plan did not meet minimum value and is not considered affordable under the law. Individuals who are eligible to purchase insurance (uninsured and self-insured) in the Health Insurance Marketplace may qualify for financial assistance.
      Thank you,
      Lisa Greene-Lewis

  13. If you are offered insurance through your place of work, do you have to take it or can you still shop around at the marketplace?

  14. We are a one income family of 5. My husband works as an administrator at a local school district. His salary this year will not exceed $77,000. Our health insurance monthly payment has been steadily increasing in the last 3 years, and we will now be paying $1,100 a month, an increase of $150 from last year, and $600 over the last 3 years. Would we qualify for a subsidy of any kind? We are paying for the lowest plan offered.

  15. Is money withdrawn from my 401K considered income when applying for the health premium subsidy ?

    63 years old retired receiving social security.


  16. Regarding calculations for an Obamacare subsidy…. is it based on my 2012 tax return before of after deductions?

  17. Does anyone know if the health insurance subsidies which will be available through the exchanges will be based on 2014 EXPECTED household income for or only based on PAST income?

    I ask because our 2014 household income is expected to be significantly less than 2012 or 2013. We wouldn’t qualify for the subsidy based on past income but will under our future income.

    Thank you.

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