Obamacare Subsidies May Hold Unpleasant Surprise for Uninformed Consumers

President Barack Obama’s new health care law requires some subsidies to be repaid.

Millions of middle-income families who plan to purchase health insurance under the new health care law, Obamacare, next year may find an unpleasant surprise awaiting them. President Obama’s health care law has a little known clause buried within the pages of the voluminous document that may require part or all of the money to be repaid.

The good news is Obamacare will provide subsidies for people to buy private health insurance if they aren’t already covered by employers. The subsidies are income-based. Those with lower incomes receive higher subsidies. When people apply, the government will use 2012 tax returns filed this year to determine how much of a subsidy to grant each individual or household.

The bad news is if a larger subsidy is received than is allowed under the new law because the consumer has experienced an increase in income or change in status, all or part of the subsidy monies received must be paid back when the 2015 tax return is filed. That could result in unexpected tax bills.

Tax experts, health care providers and advocates say the majority of Americans are not familiar with the details of the new health care law.  In general the average taxpayer knows even less about the detailed information needed to understand the section of the new law regarding penalties and subsidies.

If people are unsure if their current income will change, the application for insurance asks them to project their income for 2014. It doesn’t tell consumers that they may have to repay the subsidy money if their income increases.

Nearly every American will be required to have health insurance beginning in 2014. The Obama administration is working to assure consumers are informed of the new health care law and its benefits.

This year, subsidies are available to families with incomes of approximately $62,000 for a family of two and $94,200 for a family of four. There are limits in place regarding repayment. For example, a family of four with an income of less than $47,000 would be required to repay no more than $600. If the same family makes between $47,000 and $70,000, the maximum amount they would have to repay is $1,500. The maximum the same family making between $70,000 and $94,200 would be required to repay is $2,500. Families making more $94,200 would have to repay the entire subsidized amount. If incomes unexpectedly vary from one year to the next, many people could end up owing money back to the government.

The enrollment season begins on October 1st. Consumers are urged to learn as much as possible about this new law before October in to avoid any hardships unexpected tax bills may cause.

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