What is a Health Care Subsidy?

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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.



58 responses to “What is a Health Care Subsidy?”

  1. i am 63 single and only get social security of 1195 a month , showing a 13930 net benefit for 2018 I get insurance thru healthmarket place paying 24.00 a month -based on annual total credit of 11208.00,, when I calculate thru turbo tax, turbox tax shows I owe the irs $4.00 . could this be correct I do not get any refund??? thanks for letting me know…

  2. The people telling you the subsidy is free, and if you don’t use it you get it as a refund are WRONG. This is a fact they are not telling people and it is hurting the very people it is suppose to be helping. The truth is what ever you take in subsidy you have to claim as additional income when you file your taxes, and you will pay taxes on it. It happened to me and other people I know. It will take it out of your refund if you have one, if not you will have to pay, what you owe. Figure what they paid for you, and you will have to pay at least 10% of that back if not more. It is a crime that no where does it tell you that on the website. This same thing happened in Florida after the Hurricanes in 2004, the government offered help to pay for repairs, a subsidy, what they didn’t tell people was you had to pay it back when you filed a tax return.

    • Hi Lorrie,
      If you estimate your income lower than you actually make when you go to get your subsidy, then you may owe, but many taxpayers saw an additional premium tax credit because their actual income was lower than their estimated. The best way to prevent that is to try and take half of your advanced premium tax credit up front. Also, make sure report changes in income and family size to the Marketplace so they can recalculate your advance premium tax credit. These are tips that appear in many of our health care posts.
      Thank you,
      Lisa Greene-Lewis

  3. Wondering….can I get BOTH a healthcare subsidy AND the Earned Income Credit? Are either of them lower because I also get the other? I earn about $20k a year and rely on the EIC. I’m right at the Medicaid threshold and trying to make sense of this.

  4. Being self-employed, had a $247 a month plan, and I was eligible for a monthly Advance Payment of Premium Tax Credit of almost $200 a month. I elected not to take any, figuring I’d get it back at the end of the year if all of my numbers were correct.

    I too got goose eggs on Column B for my 1095-A, so I called the Marketplace and was given an SLCSP of $246 to put on each month for Column B that I was enrolled. But I still had $0 for column C. It wasn’t giving me the advance payment tax credit back….at least until I put $1 in each of those columns. Then it gave me it back in spades.

    From the looks of it, there’s a bug when you didn’t get any subsidy and there are $0’s for Column C. That’s the only thing I can figure, as the numbers are good on examples where I took a monthly $100 Advance Credit Payments.

    • As a followup, it shows that I qualify for $2723 tax credit advance. With me taking $0 throughout the year, I should be receiving that as a refund. I put $1 on one line in column B and it said my refund would increase by $2722. Anything that is listed in column B should be deducted from what you qualify for, but with $0, it just says you don’t get anything back. I’m kind of upset since I paid for the Business version of Turbotax.

  5. I qualified for a health insurance subsidy in 2014. I am from Oklahoma and am on social security
    and a bit of retirement. I owed no income taxes when I ran my turbotax until I put in the info. from
    my subsidy(my income was the same as when I qualified for the subsidy). Turbo tax says I have
    to repay $1,500 of the subsidy. I am furious and don.t understand why. Please explain

  6. I applied for a credit to help with my insurance costs for 2014. Half way during the year my income dropped so I qualified for Medicaid. Will I have to pay back what I used for the first half of the year? What will happen with the portion I did not have to use? I am afraid that my taxes will be affected and I can’t afford to have all my taxes taken.

    • Hi Kellie,
      TurboTax will calculate the amount of premium tax credit you should have received based on what is entered from you Form 1095-A. If you received more tax credit it may reduce the amount of your tax refund or you may owe some, however you may be eligible for additional tax credits and deductions that may offset that amount. With your income level you may be eligible for credits like the Earned Income Tax Credit. TurboTax will walk you through the tax credits and deductions you’re eligble for.
      Thank you,
      Lisa Greene-Lewis

      • why is turbo tax saying I need to repay $300 of my subsidy when my income is a negative ? (-$11,000) ?

  7. I took the tax credit to help lower my insurance every month . I always get back federal income tax . Since I took the tax credit
    Do I still get my
    Federal or not Im confused .

    • Hi Brad,
      You may not owe necessarily. You may be eligible for deductions and credits which could help.
      Thank you,
      Lisa Greene-Lewis

  8. I draw 802.00 soc sec and will be making 619.00 a month gross on an Experience Works program. I got the subsidy for major medical free but had to pay for accidental AND critical for $45.00 a mo. they denied me cancer and heart insurance. what I am wondering tax time I was told soc sec doesn’t count on taxs so with the exp wks program income I wont’ make enough to file taxes. I was told by market place I have to file taxes. Are they going to bill me the 426.00 a mo they are paying for major medical IN 2016 WHEN I file taxes??? Rhoda

  9. I did not buy my plan through the Exchange. I bought it straight from the insurance company. I did not expect to qualify for subsidy. It turns out our income was less than expected and I would have qualified for Premium Tax Subsidy. How can go and recapture that tax credit on my tax return?

  10. Well, I got my 1095A. Problems.
    When I signed up in Dec. 2014 I was told I qualified for $165 monthly assistance, based on my income…I elected to receive $100/month assistance. I ended up paying the full premium myself, because that was the bill that my insurance company sent to me (always was the full amount.)
    I figured OK, it would all clear up when I did my taxes, and I’d get the $165 / month subsidy when I did my taxes. But now, my 1095A has $-0- in column B, where they were supposed to put SLCSP value.
    It should have been a higher $ amount than what I was paying, listed in column A. But all I got were zeroes.
    Now the instructions say that a -0- will be in Column B if you didn’t qualify for subsidy, or if you didn’t pay the premiums(which I did, on both counts).
    But I’m still Okay to get my subsidy back as a tax refund (on form 8962 line 11, which would be a negative number after calculations) EXCEPT that the instructions say if you get a negative number to enter Zero.
    So anyway, I guess unless my 1095A gets corrected, or the instructions for the 8962 get corrected, I don’t get the subsidy that I was promised. Can anyone help?
    I called healthcare.gov number, these people didn’t even know what a 1095A was. I finally got transferred to a supervisor, then again to someone else, who knew a little something, who is sending my complaint on to somebody else…

  11. My son works part-time and it was difficult to determine his hours for the year 2014. He was allowed a subsidy based on his estimated income of $12,000. However, in 2014, he fell short of that and earned 10,900. From what I read, he will have to pay the subsidy back. Will this be the amount he received every month for the whole year? He won’t have the funds to cover that. How will this work?

  12. 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

    • 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.

  13. 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?

    • 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

      • I just spoke with the Marketplace and they informed me that any premiums paid on my behalf would be collected from my taxes ($3,180.00). If this is true it will devastate me financially. I am a single mother with three kids, two of which are disabled. I was right with my income estimate for 2014 and the computer said I qualified for a subsidy and I signed up with Vantage. I have paid my part of the premium this year. I thought this was assistance NOT credit from my income tax refund. I am seriously concerned. The Marketplace lady explained it like they were giving me credit for the premiums from my income tax refund.

      • If you received a tax credit from the government it will not come out of your normal return. the 3,180.00 you got all year just won’t been given to you if you chose to get it monthly instead of at the end of the year. Had you not chosen to take the subsidy every month you would have gotten your normal return plus the 3,180.00 extra. That you was qualified for.

      • If you received a tax credit from the government it will not come out of your normal return. the 3,180.00 you got all year just won’t been given to you if you chose to get it monthly instead of at the end of the year. Had you not chosen to take the subsidy every month you would have gotten your normal return plus the 3,180.00 extra. That you was qualified for. I work for the health insurance marketplace.

  14. 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?

  15. 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

  16. 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?

  17. 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?

    • 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.

      • Its true. We canceled out a for this very reason. Its a loan, not assistance. They are giving you your qualifying tax credit early, thru the form of paying the insurance company.

    • No that is not true. Only way that you would not get a normal return is if you lied about how much you make and the difference could come out of your tax return. The premium tax credit is extra if you chose to use it monthly you won’t get the extra back on your taxes. Your normal return is unaffected. Say if you get a tax credit of 5,000.00 for the year and you chose not to take it monthly you would get the extra 5,000.00 back on your taxes. On the other hand if you did chose to take it you would still get your normal return only. not the extra you took through the year.

  18. 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?

  19. 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?

    • 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

    • They don’t care about your net worth. They only care about your income. If you have no income and 10 Million in the bank you can get medicaid. However, watch out medicaid has a cost recovery scheme where they can go after your wealth after you die. However, if you can pull money out of an IRA and force your income to around 20K you can get a nice subsidy.

  20. 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?

  21. 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?

  22. 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

  23. 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?

    • 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

  24. 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?

  25. 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.

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

    63 years old retired receiving social security.


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

  28. 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.

    • The actual subsidy will be based on your actual income for the year. They will base what they pay out on a monthly basis (at least in Maryland) on what you tell them you expect your income to be. This will have to be rectified with your taxes, so you may get more back or less. If your income changes you are suppose to tell them.

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