Obamacare tax credits.

[AccTaxMan]

The Obamacare tax credits aka Affordable Care tax credits is calculated based on the MAGI of the taxpayer. Does anyone knows which year of the MAGI is to be used? As far as I know, most people will have their new policy starts on 1/1/2014. Since the 2013 tax return is not available at that time, do they use the taxpayers' income in the 2012 tax return, which is like more than 1 year ago? I think it makes more sense to use the current income of the taxpayer.

[TaxGuyBill]

It is the 2014 MAGI.

The credits and reconciliation will be figure on the 2014 tax return (filed early 2015). The taxpayers need to ESTIMATE their 2014 income, often based on the 2012 amount.

The 'advanced' payments will be reconciled on the 2014 return, based on the 2014 MAGI.

http://www.law.cornell.edu/uscode/text/26/36B#f

[Gretel]

I believe the income verification is based on tax year 2011. I remember being so surprised that 2012 is not used. Maybe my memory fails me or they changed it. Yes, reconciliation will be done in 2014 with 2014 income.

[AccTaxMan]

It is the 2014 MAGI.

The credits and reconciliation will be figure on the 2014 tax return (filed early 2015). The taxpayers need to ESTIMATE their 2014 income, often based on the 2012 amount.

The 'advanced' payments will be reconciled on the 2014 return, based on the 2014 MAGI.
http://www.law.cornell.edu/uscode/text/26/36B#f

In doing the estimation? Does the taxpayer have to use the 2012 income even if he knows it will change a lot in 2014?

For example, taxpayer had two jobs in 2012 so he made $40,000 in that year. But he has quitted one of them in 2013. And he has decided to only work the remaining job in 2014 so his income will go down to $25,000. In this case, can he use $25,000 for the estimation?

[TaxGuyBill]

I'm clueless to the actual application process, and maybe State exchanges are different than Healthcare.gov. You may need to submit your 2012 return for "income verification", especially if you are below 250% of the Federal Poverty Level and therefore qualify for "cost-sharing reductions". However, that is only a guess.

Here are a few statements from Healthcare.gov:

When you apply for lower costs in the Marketplace, you’ll need to estimate your income for 2014.

Do I have to report my 2013 income too? Yes. When you apply you’ll need to tell us your household income now (your estimate for 2013) and also estimate the amount for 2014, taking into account changes you expect.

https://www.healthcare.gov/what-income-and-household-information-do-i-provide-when-i-apply-for-marketplace-coverage/#question=do-i-have-to-report-my-2013-income-too

https://www.healthcare.gov/search/?q=estimated+income&output=xml_no_dtd&site=healthcare&proxystylesheet=json&client=json&lr=lang_en&ie=UTF-8&oe=UTF-8&access=p&sort=date%3AD%3AL%3Ad1&start=0&num=6&getfields=search-title.content-type.topics&rc=1&filter=0

[mactoolsix]

My wife is getting healthcare insurance thru Covered Calif. Since I am "retired" and we can control our taxable income which is now quite low. We completed the enrollment using projected figures for tax year 2014. There was no "verification" process. If we "fudge" the figures to get a lower monthly premium payment, it would increase the tax due upon reconciliation in April 2015. I don't believe there is any income "verification" in the process.

Mike