ACA simple unafforable calculations

[nwtaxlady]

My client is single and has household income of only $13,662. The monthly LCBP is $183 for him. So annually $2196.

Looking in The Tax Book page 3-23 it says "Coverage is considered unaffordable if the minimum premium is more than 8.16% of household income."

With this clients income it looks to be unaffordable if you take $13,662x8.16%=$1115 and his LCBP annually would be $2196 which is more.

My software is telling me that it is affordable. Can someone explain why?

Thanks

[DonB]

My client is single and has household income of only $13,662. The monthly LCBP is $183 for him. So annually $2196.

Looking in The Tax Book page 3-23 it says "Coverage is considered unaffordable if the minimum premium is more than 8.16% of household income."

With this clients income it looks to be unaffordable if you take $13,662x8.16%=$1115 and his LCBP annually would be $2196 which is more.

My software is telling me that it is affordable. Can someone explain why?

Thanks

Your software can not make that decision without you entering information about the cost of ACA insurance, and the availably and cost of employer insurance. ACA insurance is most likely free after considering the Premium Tax Credit, therefore affordable.

Here is the most fabulous web site to help you with this: http://www.healthreformbeyondthebasi...e-tool/#ty2017

[TaxGuyBill]

It is based on the cost AFTER the Premium Tax Credit they COULD have received. So if they had bought Marketplace insurance, their cost would have been less than 2% of their income.

https://www.irs.gov/pub/irs-pdf/i8965.pdf#page=11

However, that does NOT necessarily mean the taxpayer owes the penalty. :-) Do they live in a State that has fully expanded Medicaid?

https://www.kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act

Out of curiosity, what software do you have that has the capability of telling you if it was affordable or not?

[Twin Turbo Z]

The Obamacare site has a great tool. https://www.healthcare.gov/tax-tool/#/ Download the pdf of the lcbp and lcsp and then complete the worksheets on form 8965 based on clients income and credit. I then create a pdf of the worksheets and attach it and the pdf from Healthcare.gov (link provided) to the return. Fill out the 8965 via your software too. Did not have many qualify last year, but this year the premiums in our area have doubled and tripled. So many clients without insurance qualify.

[nwtaxlady]

Your software can not make that decision without you entering information about the cost of ACA insurance, and the availably and cost of employer insurance. ACA insurance is most likely free after considering the Premium Tax Credit, therefore affordable.

Here is the most fabulous web site to help you with this: http://www.healthreformbeyondthebasi...e-tool/#ty2017

Thanks for the link!

[nwtaxlady]

It is based on the cost AFTER the Premium Tax Credit they COULD have received. So if they had bought Marketplace insurance, their cost would have been less than 2% of their income.

https://www.irs.gov/pub/irs-pdf/i8965.pdf#page=11

However, that does NOT necessarily mean the taxpayer owes the penalty. :-) Do they live in a State that has fully expanded Medicaid?

https://www.kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act

Out of curiosity, what software do you have that has the capability of telling you if it was affordable or not?

Thanks, I was just confused since in TTB it just states that if it was more than 8.16% of household income then it is unaffordable. TTB does not go into detail about after what it would be if you qualify for PTC. Which I knew this that's why I was confused. Just poor explanation on unaffordability in TTB.

I go to healthcare.gov and get the SLCSP and the LCBP figures and then put them into the software and then it does all the worksheets. I use Lacerte.

Thanks for your help.

[DonB]

Thanks, I was just confused since in TTB it just states that if it was more than 8.16% of household income then it is unaffordable. TTB does not go into detail about after what it would be if you qualify for PTC. Which I knew this that's why I was confused. Just poor explanation on unaffordability in TTB.

I go to healthcare.gov and get the SLCSP and the LCBP figures and then put them into the software and then it does all the worksheets. I use Lacerte.

Thanks for your help.

My understanding: Having employer insurance available disqualifies one for the Premium Tax Credit. So, if the employer insurance is greater than 8.16% of income, the affordable exception applies.

[nwtaxlady]

My understanding: Having employer insurance available disqualifies one for the Premium Tax Credit. So, if the employer insurance is greater than 8.16% of income, the affordable exception applies.

oh... That is a good point. In this case, not offered thru employer.