How Obamacare subsidies could impact your tax refund

WASHINGTON — Taxes? Who wants to think about taxes around Labor Day?

But if you depend on your tax refund and you’re one of the millions of Americans getting tax credits to subsidize your health insurance 2014-09-04_1510premiums under President Barack Obama’s law, it’s not too early.

Here’s why: If your income for 2014 exceeds the estimate you provided when you applied for health insurance, then complex connections between the health law and the tax code can reduce or even eliminate your tax refund next year.

Maybe you’re collecting more sales commissions in an improving economy. Or your spouse got a promotion. It could trigger an unwelcome surprise.

The danger is that as your income grows, you don’t qualify for as much of a tax credit. Any difference will come out of your tax refund, unless you have promptly reported the changes.

“If you got too much of a subsidy, consumers will see money coming out of their refund,” Meg Sutton, a senior advisor for tax and healthcare services at H&R Block, told CBS News.

The tax credits are available to individuals with household incomes between 100 and 400 percent of the federal poverty level, taking into account factors like family size. Nearly 7 million households have received subsidies, and major tax preparation companies say most of those consumers appear to be unaware of the risk.

“More than a third of tax credit recipients will owe some money back, and (that) can lead to some pretty hefty repayment liabilities,” said George Brandes, vice president for health care programs at Jackson Hewitt Tax Service.

Two basic statistics bracket the potential exposure:

The average tax credit for subsidized coverage on the new health insurance exchanges is $264 a month, or $3,168 for a full 12 months.

The average tax refund is about $2,690.

Having to pay back even as little as 10 percent of your tax credit can reduce your refund by several hundred dollars.

Tax giant H&R Block says consumers whose incomes grew as the year went onshould act now and contact or their state insurance exchange to update their accounts.

They will pay higher health insurance premiums for the rest of this year, but they can avoid financial pain come spring.

“As time goes on, the ability to make adjustments diminishes,” warned Mark Ciaramitaro, H&R Block’s vice president of health care services. “Clients count on that refund as their biggest financial transaction of the year. When that refund goes down, it really has reverberations.”

The Obama administration says it’s constantly urging newly insured consumers to report changes that could affect their coverage.

But those messages don’t drive home the point about tax refunds.

“What probably isn’t clear is that there may be consequences at tax time,” said Ciaramitaro.

Aaron Albright, a spokesman for the Health and Human Services department, said the administration plans to “ramp up” its efforts.

Concern about the complex connection between the health care law and taxes has increased recently, after the Internal Revenue Service released drafts of new forms to administer health insurance tax credits next filing season.

The forms set up a final accounting that ensures each household is getting the correct tax credit that the law provides. Various factors are involved, including income, family size, where you live and the premiums for a “benchmark” plan in your community.

Even experts find the forms highly complicated, requiring month-by-month computations for some taxpayers.

Taxpayers accustomed to filing a simplified 1040EZ will not be able to do so if they received health insurance tax credits this year.

Some highlights:

— You may have heard that the IRS cannot use liens and levies to collect the law’s penalty on people who remain uninsured. But there is no limitation on collection efforts in cases where consumers got too big a tax credit. If your refund isn’t large enough to cover the repayment, you will have to write the IRS a check. “They are not messing around,” Brandes said.

— Health insurance is expensive, and with that in mind, the repayment amount the IRS can collect is capped for most people. For individuals making less than $22,980 the IRS can only collect up to $300 in repayments. That rises to $750 for individuals making between $22,980 and $34,470. For individuals making between $34,470 and $45,960, the cap is $1,250.

For families, the cap is double the amount that individuals can be charged, but the income thresholds vary according to household size. An IRS table may help simplify computation, which is based on the federal poverty levels for 2013.

— There is no collection cap for households making more than four times the federal poverty level. They face the greatest financial risk from repayments, because they would be liable for the entire amount of the tax credit they received.

Those income thresholds are $45,960 and above for an individual, $78,120 and above for a family of three, and $94,200 for a family of four. Ciaramitaro says people facing that predicament should try to minimize their taxable income through legal means, such as putting money into an IRA. The IRS says it will work with taxpayers who can’t pay in full so they understand their options.

— If you overestimated your income and got too small a tax credit for health care, the IRS will increase your refund.

Funneling health insurance subsidies through the income-tax system was once seen as a political plus for Obama and congressional Democrats. It allowed the White House to claim that the Affordable Care Act is “the largest tax cut for health care in American history.”

But it also made an already complicated tax system more difficult for many consumers.

What is the Affordable Care Act(ACA)?

The Affordable Care Act puts consumers back in charge of their health
care. Under the law, a new “Patient’s Bill of Rights” gives the
American people the stability and flexibility they need to make
informed choices about their health.

View Key Features of the Affordable Care Act or read a year-by-year
overview of features.


  • Ends Pre-Existing Condition Exclusions for Children: Health plans
    can no longer limit or deny benefits to children under 19 due to a
    pre-existing condition.
  • Keeps Young Adults Covered: If you are under 26, you may be
    eligible to be covered under your parent’s health plan.
  • Ends Arbitrary Withdrawals of Insurance Coverage: Insurers can no
    longer cancel your coverage just because you made an honest mistake.
  • Guarantees Your Right to Appeal: You now have the right to ask
    that your plan reconsider its denial of payment.


  • Ends Lifetime Limits on Coverage: Lifetime limits on most
    benefits are banned for all new health insurance plans.
  • Reviews Premium Increases: Insurance companies must now publicly
    justify any unreasonable rate hikes.
  • Helps You Get the Most from Your Premium Dollars: Your premium
    dollars must be spent primarily on health care – not administrative


  • Covers Preventive Care at No Cost to You: You may be eligible for
    recommended preventive health services. No copayment.
  • Protects Your Choice of Doctors: Choose the primary care doctor
    you want from your plan’s network.
  • Removes Insurance Company Barriers to Emergency Services: You can
    seek emergency care at a hospital outside of your health plan’s network.


Thinking of my son today.

My son has been gone to US Naval Academy Prep School for two months. We are extremely proud of him and just want to be a pillar of support and he fulfills his dreams

Andrew Samaniego NAPS 2014
Andrew Samaniego NAPS 2014

Andrew I watched this video today and thought of you!

Wear sunscreen and retire early.

This morning I was reading an article from one of my favorite blogs: Early Retirement Extreme. I thought you would enjoy it.

Don’t wear sunscreen



Spoken to the tune of “Wear Sunscreen”.

If I could give you a single piece of advice. This would be it: Live beyond your means. The long term consequences of living beyond your means have been demonstrated to lead to bankruptcy whereas the rest of my advice is only intended to poke fun at consumer culture.

Buy as much house as you can afford. In fact, buy a bigger house than you can afford. Get a no money down ARM. Don’t worry. Real estate always go up, so if money Logo Sunscreengets short, get a second mortgage. Buy a new dining room set. Your current set is sooo yesteryear. Keep the lights on. Turning them off wastes energy. Keep the heat turned up. If it gets too warm, wear shorts even if it’s winter outside. So go buy some shorts. Buy a new car and replace it every second year. Fully loaded is the way to go. Fill your garage with stuff that no longer fits inside your home. Fully loaded goes for your garage as well. Besides, parking your car outside while keeping your garage door open leaving all your stuff for the world to see will impress the neighbors. Buy a second car. A jeep that never leaves the road is a classy choiceand demonstrate your sense of adventure. Marry the person you fell in love with four months ago. Get a divorce four years later but not before you have had at least two kids. Buy hydroxycut and two gym memberships to get in shape for the beach. Remarry. Repeat and rinse. Eat out at restaurants. Order food in. Party. Get a 250+ channel cable subscription but keep renting movies. Build your own home cinema. Build your own game room. Build a home bar. Install a heated pool for the garden. Charge everything on credit cards. Make minimum payments. When you can’t make payments, consolidate, and keep charging. Get a second job to pay the bills. Worry about money. Wonder why there are never any money around at the end of the month to make ends meet. Get a payday loan. Think about bankruptcy. Everybody deserves a fresh start, right. Oh yeah, and forget about the sunscreen, you will spend the rest of your life working.

Visit website at:

Andrew first pictures from Naval Academy Prep School

Andrew officially enlisted in the United States Navy and is now attending the US Naval Academy Prep School program in Newport, Rhode Island. He will attend a 3 week military indoctrination and then start academic class. Upon completion of the program he will be become part of the 2019 United States Naval Academy Class. We have been blessed by the community of parents who have been so helpful over the last few days. I wanted to personally thank Shiri Ndang for all her help and especially letting Andrew use her phone after he took the oath. 

Here a the first few picture of Andrew on I-day!

Andrew is reporting into NAPS.
Andrew Samaniego reporting to US Naval Academy Prep School



Andrew is study rates after fresh new haircut!
Andrew Samaniego is studying rates after fresh new haircut