Yesterday, the Washington Health Benefit Exchange (HBE) issued a press release claiming that Healthplanfinder enrollees received $334 million in tax credits last year. According to HBE, the average monthly tax credit per family was $390 a month, or more than $3,100 annually. HBE customers must provide their “estimated annual income” to determine eligibility such tax subsidies. Of course, because HBE deals in estimations, these same enrollees may be in for a rude awakening once they file their federal taxes.
Accountants and tax specialists across the country are predicting Americans are simply unprepared to deal with the reality of this tax season. George Brandes, vice president for health care programs at Jackson Hewitt Tax Service, told CBS News, “More than a third of tax credit recipients will owe some money back, and (that) can lead to some pretty hefty repayment liabilities.”
Why will one-third of tax credit recipients owe money to the government? Simply put, it’s the flawed nature of the Obamacare subsidy system—the system HBE was quick tout as good news. CBS News,
If your income for 2014 exceeds the estimate you provided when you applied for health insurance, then complex connections between the health law and the tax code can reduce or even eliminate your tax refund next year.
Maybe you’re collecting more sales commissions in an improving economy. Or your spouse got a promotion. It could trigger an unwelcome surprise.
The danger is that as your income grows, you don’t qualify for as much of a tax credit. Any difference will come out of your tax refund, unless you have promptly reported the changes.