Julie’s Got You Covered

Avoiding Tax Surprises: Health Insurance Tips and Tricks

• Julie Sears • Episode 6

Share episode

How Do Subsidies Or Tax Credits Work When Purchasing Health Insurance During Open Enrollment?

Can understanding the nuances of subsidies and tax credits really save you from unexpected financial burdens? Join us on Julie's Got You Covered, where Sophia Yvette and I, Julie Sears, break down the complex world of health insurance aids, turning it into something you can actually use to your advantage. As open enrollment looms, we unravel how age, income, and household size can significantly impact your eligibility for financial assistance, and why overestimating your income could spare you from end-of-year surprises with the IRS.

We'll also share insights on navigating income fluctuations and planning ahead to avoid tax penalties. Discover the limitations of subsidies, especially when weighing on-exchange versus off-exchange health plans, and learn strategic tips for self-employed individuals or those exploring private options. With current legislation set to shift in the coming years, staying informed has never been more crucial. Equip yourself with the knowledge to make confident health insurance decisions that align with your financial goals.

To learn more about Integrity Health Insurance Advisors visit:
https://www.IntegrityHealthInsuranceAdvisors.com/
Integrity Health Insurance Advisors
469-348-4066

Speaker 1:

Welcome to Julie's Got you Covered, the podcast where Julie Sears, founder of Integrity Health Insurance Advisors, takes the fear out of finding the right health insurance. With seven plus years of experience, she's here to make finding the perfect coverage a breeze. Stay tuned for details on how you can snag a free 30-minute consultation.

Speaker 2:

Subsidies and tax credits can make health insurance more affordable, but understanding how they're calculated and applied can be overwhelming. Julie Sears simplifies the process, showing how these financial aids work to reduce costs and fit your budget. Welcome back everyone. I'm Sophia Yvette, co-host, slash producer, back in the studio with Julie Sears. Julie, how are you Good? How are you today? I'm good. So, julie, how do subsidies or tax credits work when purchasing health insurance during open enrollment?

Speaker 3:

So the tax subsidies those credits that people receive. You can either take them up front or on the back end when you file your taxes. Most people elect to take them up front and save the money throughout the year. But it is a sliding scale based on age and how much you're earning and how many people are in that household and how many are actually enrolling in coverage. So if you are a five-person household but only three people are enrolling in coverage, you don't actually get the full credit that you would should all five enroll. But everybody's situation is different. So we just kind of take that into account and shop and try to maximize those savings, utilizing any tax credits or any tax deductions that we can, based on what their situation is going to look like for that next year.

Speaker 2:

And what factors determine whether someone qualifies for subsidies or tax credit.

Speaker 3:

It's truly just based on their income. It's just based on their demographics, so it's going off of your zip code, your age and your estimated income for the next year, and with self-employed individuals that number can fluctuate. So I always encourage everybody to overestimate a little bit so that you don't get into a situation with the IRS at the end of the year when they go to reconcile making sure they didn't give you too much of a credit and then wanting you to pay that back at the end of the year. So always better to be a little conservative and not take as much. We just look at what that estimated is and of course, you can always update throughout the year just to make sure you stay on top of it and make sure you don't owe the IRS more than you need to at the end of the year.

Speaker 2:

That is always important, isn't it?

Speaker 3:

Yes.

Speaker 2:

So how does income impact the amount of financial assistance someone might receive? Is it a big difference based on your income bracket?

Speaker 3:

Yeah, so every $10 increment will decrease the amount of credit that the government will allow on that credit. So the more you earn, the less you're going to get in credits. The ACA may be a great route to secure your coverage and take advantage of those tax credits eligible. Currently there is additional legislation in place that is expanding those credits. It is set to expire at the end of 2025. So there's a lot of scare tactics going around this open enrollment that those credits are about to expire. They won't affect anything until 2026. So we can just deal with this year ahead and then deal with that one when the time comes, because the government has a whole year to make changes or keep those discounts in place. We're going to take one year at a time at this point.

Speaker 2:

Yes, and can subsidies apply to all types of plans or are there restrictions on eligibility?

Speaker 3:

It sounds like there is there is so those are just going to apply for on-exchange plans. If a plan outside the exchange seems to be a better fit for your family, those tax credits won't apply, but in those cases you can utilize those as a deduction for your self-employed health insurance premiums. If you do happen to be self-employed, or oftentimes there might be private options that are available that come in less even with a tax subsidy applied, what about if my income fluctuates?

Speaker 2:

Should I plan for surprises or just cross my fingers and hope the IRS has a sense of humor?

Speaker 3:

I always like to plan for surprises because I don't feel that my sense of humor is the same as the IRS's and I don't want to get hit with those tax penalties at the end of the year where they make you pay it all back. Well, if you keep it updated throughout the year, I always tell my business owners run those quarterly reports, go ahead and just see where you're at year to date and if you're still tracking to where you estimated or is it more than what you expected, and go ahead and just update and go ahead and increase those premiums now moving forward, instead of waiting till the end of the year and just letting it all sort itself out. So I just make sure the people I'm working with are aware that would be my method. They can choose whatever method they choose.

Speaker 2:

Now, when we're getting into how to actually use the tax credits. Can I use my tax credits to buy health insurance and a cup of coffee? Asking, because priorities are always important.

Speaker 3:

Yes, I fill you on the caffeine, especially this time of year, more than most. Those tax credits are strictly just to use to lower those premiums on your health insurance. So even if you are, say, qualified for a $600 premium tax credit but the plan you chose would have only been $400, you just get the free insurance. In those cases I just recommend going for a better plan and maybe looking at buying down some deductible or out of pocket maximum, If you can get it with that tax credit, instead of just going for the lowest costing plans.

Speaker 2:

Love it, julie. We'll catch you on the next episode. Have a fantastic rest of your day, you too.

Speaker 1:

Thanks for tuning in to. Julie's got youed Ready to say goodbye to insurance stress Head to integrityhealthinsuranceadvisorscom or call 469-348-4066. That's 469-348-4066 to book your free 30-minute consultation With Julie. Health insurance doesn't have to be scary, she's got you covered.