Do the subsidies available through the exchange count as income? If not, what are they?

Premium subsidies and cost-sharing subsidies are not counted as income and cannot be taxed. Premium subsidies are tax credits, though they differ from normal tax credits in significant ways. First, they are refundable, which means that you can receive them even if you are unemployed and wouldn’t ordinarily be required to file income taxes (though in that type of scenario, someone in your household would still need to be earning enough to qualify for the subsidies in the first place). A premium subsidy can reduce the amount of taxes that you owe and can even take that number below zero, earning you a refund. Premium subsidies do not need to be taken on your tax return, though. You can also opt to have them paid out directly to your insurance carrier throughout the year in order to reduce the cost of your monthly premiums. While you can choose to do things either way, many people opt to spread their subsidy out in this manner so that they don’t have to pay the full cost of their insurance and then wait many months to be reimbursed.

It should be noted that the amount of tax credit that you receive through your premium subsidy is based on your income over the course of the year. If you choose to split your subsidy into monthly payments to your insurer, those payments will be made based on your projected income for that year. If your actual income differs from these projections, some form of reimbursement will need to happen. If the subsidy was overpaid, you may owe money to the IRS. If the inverse happens, you will receive the remainder of what you are owed as a lump sum tax credit when filing your return. Keep this in mind if you are eligible for a premium subsidy but expect your income to change over the course of the year.

You will also be unable to receive premium subsidies if there are plans available through the exchange in your area that are affordable even without a subsidy. Specifically, you will be unable to receive premium subsidies if the net premiums of the second-cheapest silver plan available in your area are below a certain percentage of your income. This is most commonly a problem for younger people, since they typically have very low premiums. The pricing of silver plans can vary wildly from one location to another, so whether this will be a problem for you will depend on where you live.

Cost-sharing subsidies do not have this sort of repayment system in place, so no additional money is owed in either direction if your income ends up being different than initially projected.

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I’m self-employed and earn slightly too much to qualify for a premium subsidy. What are my options?

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