Learn How Tax Credits in the GOP Health Insurance Plan Could Have Affected You

 Posted on March 10,2017 in Taxation Law

Recently, House Republicans introduced a health insurance bill that would replace the Affordable Care Act (also known as ACA or “Obamacare”). This bill was pulled before the House could vote, but its analysis is worthy as future bills may be forthcoming. The new bill was called the American Health Care Act (AHCA). Industry experts analyzed the effects of the bill and predicted that this plan, or any Obamacare replacement plan, would create “winners and losers.”

Both healthcare plans would have tax implications. Obamacare has an individual mandate requiring most taxpayers to obtain health insurance or pay a penalty when filing tax returns. It also offers tax credits. Obamacare offers a broad range of insurance premium subsidies based on household income and the local cost of healthcare insurance. The AHCA would have eliminated the required mandate and changed the tax credits that can be claimed. 

Details on the AHCA Tax Credit 

A key difference between the Obamacare and the AHCA was that the AHCA tax credits would have been based on fewer variables. The AHCA tax credits only took age into account. The credits started at $2,000 per year for those under 30 years old. For those over age 60, the tax credit increased to $4,000. Tax credits under the AHCA began to be phased out when an individual earned $75,000 or more.

Examples of How the New Bill Would Change Costs

Due to the proposed changes, there would be modifications to an individual’s health insurance premium costs. It is important to note that Northern California overall has higher insurance premiums than Southern California. 

Experts estimate that:

• A 60-year-old resident of Santa Cruz making $40,000 a year would receive almost $13,000 in premium subsidies under Obamacare in 2017. This subsidy takes into consideration income and cost of insurance in the locality. Under the AHCA, the only assistance the Santa Cruz resident would receive is a $4,000 tax credit.
• For a 27-year-old male resident of Los Angeles making $40,000, Obamacare would not provide a subsidy, and the twenty-something would pay his entire premium. Under the AHCA, this person would receive a flat $2,000 tax credit based on his age.

Experts have predicted that those who would benefit under the ACHA would be those who are younger, have a higher income, and live in low-cost health insurance areas.

Contact a San Francisco Bay Area Tax Attorney

The tax implications of the Affordable Care Act (Obamacare) and the American Health Care Act differ in several ways. It is important to adhere to the law in place and understand how proposed changes could impact your taxes. 

If you have questions about your taxes as it relates to health insurance, you should contact a knowledgeable tax attorney. To schedule your first appointment, contact San Jose tax law attorney John D. Teter by calling 408-866-1810 today.

Sources:

http://www.scpr.org/news/2017/03/08/69641/gop-health-tax-credits-would-create-winners-and-lo/ 

https://www.irs.gov/affordable-care-act/individuals-and-families