Recent legislation has eliminated a dreaded Premium Tax Credit subsidy bright-line. In previous-years, if an individual or family received health insurance subsidies by purchasing health insurance through Healthcare.gov, they had to repay ALL of the subsidies if they unexpectedly had income totaling more than 400% of the Federal Poverty Level (about 106K for a family of 4). This strange law often led to crazy and counterintuitive results on a tax return. As an illustration, if that family earned $106,001 of income in a given year, then they triggered that bright-line repayment and might have to repay $4K of subsidy (which is an effective tax rate of 400,000% on that $1 of extra earnings!). For 2021 and 2022, Congress has eliminated this cliff and now any income over this 400% of Federal Poverty Level bright-line will cause that same family to repay their subsidy at a rate of 8.5% (which is an 8.5% tax…much more sensible). Thank you Congress!
Accounting and Consulting