In the News 2014
Chicago Tribune, September 27, 2013
Pre-Medicare retirees expecting to take advantage of the new health exchanges under the Affordable Care Act may want to brush up on their tax situation.
Qualifying for tax credits to defray the cost of coverage through the exchanges is fairly straightforward for people still earning W-2 income.
If you've retired, however, you may be doing some part-time freelance work, collecting rental income, a pension or Social Security benefits or earning interest on your portfolio.
So which income counts when it comes to the subsidies?
First, let's look at the income thresholds.
According to healthcare.gov, the federal government healthcare exchange marketplace, if your family's household income falls into the ranges below you'll qualify for insurance subsidies:
- $11,490 to $45,960 for individuals
- $15,510 to $62,040 for a family of 2
- $19,530 to $78,120 for a family of 3
- $23,550 to $94,200 for a family of 4
- $27,570 to $110,280 for a family of 5
- $31,590 to $126,360 for a family of 6
- $35,610 to $142,440 for a family of 7
- $39,630 to $158,520 for a family of 8
Those ranges are expected to be slightly higher in 2014.
Generally, eligibility is based on a household's modified adjusted gross income.
That includes wages, tax-exempt and taxable interest, ordinary dividends, alimony, capital gains, Social Security benefits, taxable pensions, annuities and rental income, among other forms of income. Of course, you can still take deductions such as self-employment expenses, IRA contributions, and the like.
Essentially, it is the figure you report on Line 4 of the Form 1040EZ, Line 21 on Form 1040A or Line 37 on Form 1040, according to the University of California-Berkeley Labor Center.
If you're in the midst of retiring or downshifting to a second career and expect your income to be much different in 2014, there's more good news, noted Mike Tucker, an accountant with T.M. Byxbee Co. in Hamden, Conn. When signing up for coverage under the new exchanges, he said, consumers will be able to estimate their 2014 income rather than having to use backward-looking tax returns.
The Kaiser Family Foundation offers consumers a calculator here: kff.org/interactive/subsidy-calculator.
A couple, both 58 and non-smokers, who expect to earn $58,000 in 2014 could qualify for a subsidy of $9,870 to help pay for an expected annual premium of $15,380, according to the calculator.
Or a single woman, 62, could see annual premiums of $8,671. If she earned $43,000, she might qualify for a subsidy worth $4,586.
A family of four with two 50-year-old parents earning $90,000 would have a $14,614 annual premium, and would qualify for a subsidy of $6,064.
How do costs compare overall to what's available now in the individual market? A Rand Corp. study released Aug. 29 found that counter to some projections of premium hikes with health reform, there likely will not be a sharp spike in the cost of individual policies, said Christine Eibner, an economist at Rand.
Another financial boost for pre-65 retirees, said Eibner: Under the rating regulations called for in the new law, the oldest person in a health plan can't be charged more than three times what the youngest consumers have to pay.
Of course, those 65 and older aren't part of this equation because they presumably are already covered by Medicare, though the law also enhances certain aspects of Medicare.