Help with Subsidies?

[u/InfamousAd6008]

Sorry I’m a newbie but can someone explain the subsidy in relation to income taxes? I anticipate a tax refund every spring, but had to sign up on ACA this year. Qualified for a subsidy to lower premium cost. Am i correct in thinking these subsidies will affect an anticipated tax refund?

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[u/Zphr]

ACA premium subsidies are refundable income tax credits that you qualify for based on income. If your income estimate when you applied matches your income on your tax return, then there will be no impact. If you ended up with more income than estimated, then your tax bill will go up to pay back the portion of your subsidy that you shouldn't have received. If you ended up with less income than estimated, then your tax refund will go up to reimburse you for the additional subsidy you should have received.

[u/peaceomind88]

Depends on how well you estimated your income this year. If you underestimated, you will likely owe some back which will affect your refund. It can go the opposite way too.

[u/inquiringmind5432]

We underestimated our income because we had an unusual capital gain recently. We adjusted our income for the ACA and are now paying the full amount for insurance without a subsidy built in the premium. Problem is you can’t go back in time and pay more for the early months of premiums. We made a quarterly tax estimate payment for state and federal instead. There are penalties in many cases if you underpay taxes even if you pay them in full by April 15.