This week, the Supreme Court is expected to announce its decision on the Patient Protection and Affordable Care Act (PPACA) – also known as health care reform or “Obamacare.” If the law stands, it will create what some have dubbed the largest set of tax law changes in more than 20 years that will impact all taxpayers. If struck down (in part or entirely), it will create questions regarding tax credits that have already been implemented.
Undoubtedly, the most talked-about element of the law is the individual mandate – the requirement that all Americans have health insurance coverage starting in 2014 or face a penalty. If the law is upheld, people who don’t have insurance through work or are not covered by other avenues such as Medicaid can purchase insurance through what are called Affordable Insurance Exchanges. The law also has a provision to help those people pay for insurance through a health insurance premium tax credit, which will be advanced during the year to help subsidize the cost of the monthly insurance premium. The subsidy will first be available in 2014, and doled out by the federal government.
So what does this mean for someone who wants to buy insurance through an exchange or elects to go it alone?
First, eligibility for the health insurance premium tax credit is determined by your current income and family situation. Much of that same information also will be on your 2012 return filed next year. However, additional factors will be used to determine the amount of the credit applied to the insurance premium.
Second, the credit operates as federal financial assistance that will cover some or the entire monthly premium paid directly to the health insurance provider. Individuals who choose to remain uninsured could face a penalty – which could decrease any potential tax refund. Figuring out what your health care costs will be and understanding your responsibilities will be important.
Finally, some of the provisions in the law, such as the small business tax credit or adoption credit, already exist. H&R Block has helped countless families claim the expanded adoption credit enacted with this law, which provided eligible families with up to a $13,360 tax credit per child for 2011. But there’s still uncertainty as to what happens if the whole law is struck down. How will these provisions, and others, be treated?
Like you, we’re waiting to hear what the court will decide. Whatever the decision is, our tax professionals and online and mobile tax preparation solutions will be equipped to help you understand what it means to you come the first day of the 2013 tax season.