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2015 Obamacare Premium Tax Credit Calculator

The federal government offers a Premium Tax Credit (PTC) to qualifying taxpayers who comply with the mandate to buy health insurance.

To receive a PTC you must split the uprights between making too little and too much income. If you earn too little, you qualify for Medicaid. This precludes any PTC and subjects you to coverage that many believe is inferior to private health insurance. The PTC also vanishes if you earn too much. This happens when your household income surpasses 400% of the applicable poverty line.

Last spring, I attempted to split the PTC uprights myself and wrote about it here. After many calculations, I concluded that in return for buying at our state’s health insurance exchange,* our household would earn a PTC of $6,465—enough to pay our entire health insurance bill for the year. That was a great prognosis, but in order to turn it into reality we had to execute a plan. Specifically, we had to limit our income by cutting back on our Roth IRA conversions, which since retirement had represented most of our taxable income.

I’ve now finished our 2014 federal taxes and can report that all our efforts paid off: we’ve qualified for a total PTC worth $6,468 ($3 more than predicted because of IRS rounding). And there’s a small kicker as well: by using plastic to pay our premiums we’ve also earned $80 in credit card rewards.

With 2014 in the books, it’s now time to plan for 2015. This year, I’ve prepared a spreadsheet to ease my tax calculations. I share this spreadsheet with you today. Use it to maximize your own household’s PTC.

To operate the PTC Calculator, you enter only four numbers. The calculator then shows how much of your monthly premium will be reimbursed by the government and how much, if any, you’ll have pay out of pocket. Here are the required entries:

Line 1: Your Monthly Health Insurance Premium. Plug in the amount reported on your monthly bill.

Line 2: The Monthly Premium of the Second Cheapest Silver Plan Offered to Your Household. Known as the Applicable Benchmark Plan (ABP), see Internal Revenue Code § 36B(b)(2), this amount can be obtained by calling the marketplace from which you purchased your insurance. The ABP can vary widely from year to year. For 2014, our household’s ABP was $730.73. For 2015, it’s dropped to $637.80.

Line 3: Your Household’s Poverty Line. For tax year 2015, use the 2014 Poverty Guidelines for the size of your household as published in the three tables below. Use Table 1 if you live anywhere other than Alaska or Hawaii. Table 2 applies to Alaska and Table 3 covers Hawaii.**

TABLE 1
2014 POVERTY GUIDELINES FOR THE 48 CONTIGUOUS STATES
AND THE DISTRICT OF COLUMBIA
Persons in family/household Poverty guideline
For families/households with more than 8 persons, add $4,060 for each additional person.
1  $11,670
2  15,730
3  19,790
4  23,850
5  27,910
6  31,970
7  36,030
8  40,090

TABLE 2
2014 POVERTY GUIDELINES FOR ALASKA
Persons in family/household Poverty guideline
For families/households with more than 8 persons, add $5,080 for each additional person.
1  $14,580
2  19,660
3  24,740
4  29,820
5  34,900
6  39,980
7  45,060
8  50,140

TABLE 3
2014 POVERTY GUIDELINES FOR HAWAII
Persons in family/household Poverty guideline
For families/households with more than 8 persons, add $4,670 for each additional person.
1  $13,420
2  18,090
3  22,760
4  27,430
5  32,100
6  36,770
7  41,440
8  46,110

Line 4: Your Projected 2015 Modified Adjusted Gross Income (MAGI). For most taxpayers, there exists no difference between their 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 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 either your 2013 or 2014 tax return (see Form 1040, line 37). If your income doesn’t stay level, plug in low and high estimates to see how they affect the result.

Here’s the calculator. If its last line reports a negative value, this means that your PTC will exceed your monthly premium—a very good result indeed.

2015 Obamacare Premium Tax Credit (PTC) Calculator

Using the PTC Calculator in Your 2015 Tax Planning

Deferring or Accelerating Income. If your income for 2015 is malleable—that is if you can exercise some control over its size—the calculator can tell you how much your PTC might change if you limited or expanded your income. It might show that you would benefit by accelerating some income into 2015 or, alternatively, by deferring it into 2016. For example, if accumulated gains on stocks you now hold would push you over 400% of the Poverty Line, it might make sense to delay selling them until 2016 (but of course this strategy exposes you to the risk of intervening market downturns).

Deferring or Accelerating Adjustments to Income. The PTC Calculator might also show that you could benefit by accelerating adjustments to income into 2015, or, alternatively, by deferring them into 2016. Possible adjustments include paying student loans off early, funding Health Savings Accounts, accelerating 2016 tuition payments into 2015, and more. For a full list, see lines 23 – 35 of Form 1040.

• Avoiding Medicaid. You can also use the PTC Calculator to dodge your enrollment in Medicaid (if this indeed is something you wish to avoid). All Medicaid eligibility is based upon your family’s Federal Poverty Line Percentage (FPLP) (see line 5 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 Center for Medicaid and CHIP services, which you can access by clicking here. Several cautions apply when using this chart. First, it was published in late 2014. Rules change frequently so check for any new requirements at your home state’s Medicaid website. Second, Medicaid eligibility might vary based upon citizenship, residency, or immigration status. If any 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 5 of the calculator).

*   *  *

As always, consult your tax advisor to find out which PTC strategies work best for your unique situation. The tax code is a dense labyrinth filled with breathtaking complexity and many traps for the unwary. Hopefully, the above calculator helps to ease your journey, but you can achieve even greater confidence about your chosen path when you hire an experienced guide.

If you’d like to explore other Frugal Fringe calculators, click any of the following:

*Under a restrictive reading of the Obamacare statute, premium tax credits are available only to those who purchase insurance on exchanges operated by the states and not to those who purchase at any exchange operated by the federal government. The United States Supreme Court is reviewing this issue and oral argument is scheduled for March 4, 2015.

**I use 2014 Poverty Guidelines for the 2015 tax year because for the 2014 tax year the IRS used 2013 Poverty Guidelines (see Instructions to IRS Form 8962). I’m predicting that the same lag time will be repeated in tax year 2015.

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