Half of U.S. Households Eligible for a Tax Subsidy Under the Health Law Would Owe a Repayment, While 45 Percent Would Receive a Refund

Half of U.S. households eligible for a 2014 tax subsidy under the Affordable Care Act would owe a repayment to the government, while 45 percent would receive a refund, according to estimates from a new analysis by the Kaiser Family Foundation.

The analysis – which is a simulation based on historical patterns of income volatility among all households eligible for ACA premium subsidies — estimates that the average repayment amount would be $794, and the average refund would be $773.

The U.S. Department of the Treasury estimates that 3 to 5 percent of all tax-filing households will need to reconcile ACA advance premium tax credits when they file 2014 taxes, representing about 4.5 to 7.5 million households.

Under the health law, households with incomes from 100 to 400 percent of the federal poverty level ($11,490 to $45,960 for an individual in 2013, the base year for 2014 subsidies) can be eligible for tax credits on a sliding scale to help pay health insurance premiums for plans purchased in ACA marketplaces. Taxpayers may elect to receive the subsidies in advance, based on projected household income, but then must reconcile the income estimate with their actual income when filing federal taxes. If income is higher than projected, a household could be required to repay all or a portion of the credit. If income is lower, the household could receive a refund.

The new analysis finds:

  • Households with an original income between 100 and 200 percent of the poverty level would have the lowest average repayment ($667) and refund ($412) amounts. Recently-released federal data shows that about two-thirds of people who sign up for insurance through healthcare.gov and report their income have a household income up to 200 percent of the poverty level or $22,980 for an individual in 2013.
  • Households with an original income between 300 and 400 percent of the poverty level ($34,470 to $45,960 for an individual) would have the highest average repayment ($1,380) and refund ($1,601) amounts.
  • For nearly half (46%) of all households owing a repayment, the amount would be between $200 and $1,000. For about four in 10 (42%) households receiving a refund, the amount would fall in that range.
  • A relatively small share of households had final incomes greater than or equal to 400 percent of the poverty level ($45,960 for an individual). These households would owe the highest amounts because they would be required to repay the entire advance credit without a cap on the repayment. Repayment estimates for these households ranged from an average of $2,306 to $3,837, depending on the original income.

The estimates came from a model developed by Kaiser analysts using data from the U.S. Census’ Survey of Income and Program Participation 2008 Panel, which follows survey respondents from 2009 to 2012.

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