This year the federal government once again offers a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange.
To receive a PTC you must split the uprights between making too little and too much income. If you make too little, you drop out of Obamacare and into Medicaid. This precludes any PTC and subjects you to coverage that many believe is inferior to private health insurance. The PTC also disappears if you make too much. This happens when your household income exceeds 400% of the applicable poverty line (the government draws this line based upon your state of residence and household size).
To assist your Obamacare planning for 2017, I’ve reformatted this site’s popular PTC Calculator into an interactive online experience (for the earlier version, click here). The calculator shows how much of your monthly premium will be reimbursed by the government and how much, if any, you’ll have pay yourself. And yes, the output even includes a helpful pie chart. 🙂
To see your bottom line, enter your state of residence, the number of people in your household, and these three numbers:
Line 3: Your Monthly Premium. Plug in your monthly cost of health insurance for 2017. This is the premium you contracted to pay during the open enrollment period that began November 1, 2016 and ended January 31, 2017.
Line 4: The Monthly Premium of the Second Cheapest Silver Plan You’re Offered. Known as the Applicable Benchmark Plan (ABP), see Internal Revenue Code § 36B(b)(2), this amount can be obtained by ranking from cheapest to most expensive all the Silver plans that the health insurance exchange offered to you during the open enrollment period. The ABP is the second cheapest silver plan you were offered. You can also obtain the ABP by calling the marketplace from which you purchased your insurance. Your ABP can vary widely from year to year. For example, for 2014, our household’s ABP was $730.73, for 2015 it was $637.80, and for 2016 it was $886.85. For 2017 it will be a whopping $1,043.39.
Line 5: Your Projected 2017 Modified Adjusted Gross Income (MAGI). For most taxpayers, there exists no difference between Adjusted Gross Income (AGI) and MAGI, because most households don’t experience any of the three narrow circumstances that trigger MAGI calculations: non-taxable social security benefits (see Form 1040, lines 20(a)-20(b)), tax-exempt interest (see Form 1040, line 8b), and excluded foreign earned income and housing expenses for those who live abroad (see Form 2555, lines 45 and 50). If your income stays level year-to-year, you can enter the AGI as reported on your most recent federal tax return (Form 1040, line 37). If your income fluctuates year-to-year, enter low and high estimates for 2017 to see how they affect the results.
Here’s the calculator. If the pie chart below appears as a solid red ball, this means that the PTC will cover 100 percent of your monthly health insurance bill—a very good result indeed.
2017 PTC Calculator
|1||Enter Your State of Residence|
|2||Enter the Number of Persons in Your Family|
|3||Enter Your Monthly Premium|
|4||Enter Monthly Premium of Second Cheapest Silver Plan Offered to You|
|5||Enter Your Projected Modified Gross Income (MAGI) for 2017|
Run PTC Calculator!
|6||Your Household's Poverty Line|
|7||Federal Poverty Line Percentage (FPLP) [Line 5 / Line 6]|
|8||FPLP Rounded to a Whole Number [Line 7 Rounded]|
|9||Applicable Percentage [From 2016 Form 8962 Instructions, Table 2]|
|10||Amount to be Subtracted from Line 4 [(Line 5 * Line 9 )/ 12]|
|11||Monthly Premium Tax Credit [Line 4 - Line 10; or 0 if Line 10 = 0]|
|12||Monthly Net Cost of Premiums [Line 3 - Line 11]|
Note: values for the Applicable Percentage figure as reported on line 9 are based upon the expected premium contribution levels as listed in the 2016 version of the Form 8962 Instructions. The IRS won't release the 2017 Form 8962 instructions until late 2017.
Tax Planning Notes
Defer or Accelerate Income. The calculator can tell you how much your PTC might change if you accelerate extra income into 2017 or, alternatively, defer receiving it until 2018. For example, if accumulated gains on stocks you now hold would push you over 400% of the Poverty Line (line 8), you might delay selling them until after January 1, 2018 (but of course this strategy exposes you to the risk of any intervening market downturns).
Defer or Accelerate Adjustments to Income. The PTC Calculator might also show that you could benefit by making adjustments to income in 2017, or, alternatively, by deferring them into 2018. Such adjustments include paying student loan installments early, funding Health Savings Accounts, accelerating 2018 tuition payments into 2017, and more. For a full list of possible adjustments, review lines 23 - 35 of Form 1040.
Avoid Medicaid. You can also use the PTC Calculator to avoid Medicaid coverage (if indeed this is something you wish to avoid). Medicaid eligibility is based upon your family's Federal Poverty Line Percentage (FPLP) (see line 8 of the PTC Calculator). Whether you're subject to Medicaid is a complex question because states apply differing FPLPs based upon existing pregnancies or the number of children in the household. A fast starting point for analysis is the Medicaid eligibility chart published by the Centers for Medicare and Medicaid Services (click here). Several cautions apply to using this chart. First, it contains information current as of June 1, 2016. Rules change frequently so check for any updates at your home state's Medicaid website. Second, Medicaid eligibility can vary based upon citizenship, residency, or immigration status. If any of your household members have issues in these areas, consult an expert. Third, all states disregard 5% of FPLP when calculating eligibility. So, for example, if the eligibility chart reports your household's FPLP threshold as 133% for Medicaid, to be on the safe side boost your MAGI until you reach an FPLP of at least 138% (as reported on line 8 of the calculator).
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The tax code is a dense labyrinth filled with many traps for the unwary—and this is especially true when it comes to the complex rules that govern Obamacare. The PTC Calculator will point you in the right direction, but confirm what it tells you by consulting a competent tax advisor who knows your circumstances.
If you'd like to explore my other articles about Obamacare, click these links:
- 2015 Obamacare Premium Tax Credit Calculator
- 2016 Obamacare Premium Tax Credit Calculator Version 2.0
- Better Than Free: How Obamacare Enriches Me