Report: Tax time means overhaul subsidy repayments for many

Half of the U.S. households eligible for help buying insurance last year under the health care overhaul will likely have to repay some of that aid this tax season, thanks to the tricky task of predicting future income.

A report released Tuesday by the Kaiser Family Foundation estimated that these repayments — which can cut into or erase a tax refund — will average nearly $800, with the actual amounts varying widely.

Kaiser also estimated that an additional 45 percent of eligible households didn’t receive enough assistance based on their income and will get some sort of refund.

These repayments and refunds stem from a major coverage expansion the overhaul launched for 2014 as part of its push to cover millions of uninsured people. The law calls for income-based tax credits or subsidies to help people buy coverage. To get that help, an applicant has to estimate what his or her income will be in the year when the coverage starts.

Then the applicant has to reconcile that estimate with actual income at tax time. That means they may have to repay some of the help if income turned out higher than expected or the household may receive a refund if it came in lower. Kaiser estimates that only 5 percent of eligible households will neither owe a repayment nor receive a refund.

“It’s just very hard for people to predict accurately … how much they are going to make as much as a year from now,” said Larry Levitt, a senior vice president with Kaiser, which studies the federal law and other health care issues.

People who signed up for coverage after enrollment started in the fall of 2013 had to base their income estimates for the next year off of their 2012 tax returns. That means they likely used dated numbers.

Estimating income also can be especially tough for those who live closer to poverty levels because they are more likely to move from job to job or switch from part-time to full-time work and vice versa during a year, Levitt said.

Plus, people earning hourly wages can see their hours cut. A marriage, divorce or the birth of a child also can change a household’s income during the year and after the estimate is calculated.

Kaiser’s researchers came up with their estimates after studying U.S. Census income data for residents who would be eligible to receive subsidy help. Kaiser said about 6.7 million people had signed up for a plan on the overhaul’s public insurance exchanges and qualified for assistance by the end of open enrollment in 2014.

The researchers found that 55 percent of the households that will have to repay some of their assistance will owe $500 or less. Likewise, the same percentage of households in line for a refund will get $500 or less.

Tax services provider H&R Block also said last month that, so far this tax season, 52 percent of the people who signed up for coverage through the overhaul’s public exchanges have had to pay back a portion of the tax credit they received. H&R Block said the average amount paid back was $530. That decreased tax refunds, on average, by 17 percent.

The overhaul requires that those who receive help to report income changes during the year so subsidies can be adjusted.

Levitt, the Kaiser Family Foundation executive, expects more people to do that in future years as they become familiar with the process and seek to avoid tax season surprises.

Talk to us

More in Herald Business Journal

Members of Gravitics' team and U.S. Rep. Rick Larsen stand in front of a mockup of a space module interior on Thursday, August 17, 2023 at Gravitics' Marysville facility. Left to right: Mark Tiner, government affairs representative; Jiral Shah, business development; U.S. Rep. Rick Larsen; Mike DeRosa, marketing; Scott Macklin, lead engineer. (Gravitics.)
Marysville startup prepares for space — the financial frontier

Gravitics is building space station module prototypes to one day house space travelers and researchers.

Orca Mobility designer Mike Lowell, left, and CEO Bill Messing at their office on Wednesday, Aug. 16, 2023 in Granite Falls, Washington. (Olivia Vanni / The Herald)
Could a Granite Falls startup’s three-wheeler revolutionize delivery?

Orca Mobility’s battery-powered, three-wheel truck is built on a motorcycle frame. Now, they aim to make it self-driving.

Catherine Robinweiler leads the class during a lab session at Edmonds College on April 29, 2021. (Kevin Clark / The Herald)
Grant aids apprenticeship program in Mukilteo and elsewhere

A $5.6 million U.S. Department of Labor grant will boost apprenticeships for special education teachers and nurses.

Peoples Bank is placing piggy banks with $30 around Washington starting Aug. 1.
(Peoples Bank)
Peoples Bank grant program seeks proposals from nonprofits

Peoples Bank offers up to $35,000 in Impact Grants aimed at helping communities. Applications due Sept. 15.

Workers build the first all-electric commuter plane, the Eviation Alice, at Eviation's plant on Wednesday, Sept. 8, 2021 in Arlington, Washington.  (Andy Bronson / The Herald)
Arlington’s Eviation selects Seattle firm to configure production plane

TLG Aerospace chosen to configure Eviation Aircraft’s all-electric commuter plane for mass production.

Jim Simpson leans on Blue Ray III, one of his designs, in his shop on Friday, August 25, 2023, in Clinton, Washington. (Ryan Berry / The Herald)
Whidbey Island master mechanic building dream car from “Speed Racer”

Jim Simpson, 68, of Clinton, is using his knowledge of sports cars to assemble his own Mach Five.

Inside the new Boeing 737 simulator at Simulation Flight in Mukilteo, Washington on Wednesday, Sept. 20, 2023. (Annie Barker / The Herald)
New Boeing 737 simulator takes ‘flight’ in Mukilteo

Pilots can test their flying skills or up their game at Simulation Flight in Mukilteo.

An Amazon worker transfers and organizes items at the new PAE2 Amazon Fulfillment Center on Thursday, Sept. 14, 2023, in Arlington, Washington. (Ryan Berry / The Herald)
Amazon cuts ribbon on colossal $355M fulfillment center in Arlington

At 2.8 million square feet, the facility is the largest of its kind in Washington. It can hold 40 million “units” of inventory.

A computer rendering of the North Creek Commerce Center industrial park in development at 18712 Bothell-Everett Highway. (Kidder Mathews)
Developer breaks ground on new Bothell industrial park

The North Creek Commerce Center on Bothell Everett Highway will provide warehouse and office space in three buildings.

Dan Bates / The Herald
Funko president, Brian Mariotti is excited about the growth that has led his company to need a 62,000 square foot facility in Lynnwood.
Photo Taken: 102312
Former Funko CEO resigns from the Everett company

Brian Mariotti resigned Sept. 1, six weeks after announcing he was taking a six-month sabbatical from the company.

Cash is used for a purchase at Molly Moon's Ice Cream in Edmonds, Washington on Wednesday, Aug. 30, 2023. (Annie Barker / The Herald)
Paper or plastic? Snohomish County may require businesses to take cash

County Council member Nate Nehring proposed an ordinance to ban cashless sales under $200. He hopes cities will follow suit.

A crowd begins to form before a large reception for the opening of Fisherman Jack’s at the Port of Everett on Wednesday, August 30, 2023, in Everett, Washington. (Ryan Berry / The Herald)
Seafood with a view: Fisherman Jack’s opens at Port of Everett

“The port is booming!” The new restaurant is the first to open on “restaurant row” at the port’s Waterfront Place.