The American Rescue Plan provides significant relief to marketplace enrollees who would have had to repay some or all of their premium tax credit for 2020. But here’s what people were needing to consider in 2020 in terms of the interaction between health coverage and the COVID relief measures:
If you were eligible for Medicaid at some point in 2020 based on your monthly income, that will not have any effect on your 2020 tax return. Medicaid does not get reconciled with the IRS.
If you are in one of the 13 states where there’s still a coverage gap (plus Nebraska prior to October 2020, when there was still a coverage gap there), the additional federal unemployment benefits might have been enough to push your total projected income above the poverty level, making you eligible for premium subsidies in the exchange. Even if your income ultimately ends up below the poverty level when all is said and done, you won’t have to repay the APTC that was paid on your behalf when you file your taxes.
But on the higher end of the scale, if the additional federal benefits push your total ACA-specific MAGI higher than you originally projected but not above 400% of the poverty level, you’ll have to pay back some or all of the APTC, although there are caps that apply to the repayment amounts in that case. (Thanks to the American Rescue Plan, excess premium subsidies from 2020 do not have to be repaid to the IRS.)
And unfortunately, if the additional federal benefits push your MAGI for 2020 above 400% of the poverty level, you will have to repay all of the APTC that was paid on your behalf this year. (Again, this does not apply for 2020, thanks to the ARP.)
This last point was the most pressing concern, as it can amount to thousands of dollars being owed to the IRS, depending on where you live, how old you are, and how many months APTC was paid on your behalf for a plan purchased in the exchange (APTC is larger in areas where coverage is more expensive, and it’s larger for older people since their pre-subsidy premiums are higher). Fortunately, excess APTC of any amount does not have to be repaid to the IRS for the 2020 tax year.