Help With Health Insurance, consumers will soon be able to purchase health care coverage on new government-run insurance exchanges. The exchanges are being created pursuant to the health care reform law. The initial open enrollment period for the exchanges is scheduled to begin on October 1, 2013, and coverage will be offered on January 1, 2014.
Qualifying taxpayers who purchase health care coverage on an exchange will receive a premium tax credit to help cover the cost. The credit amount will vary with household income and the exchange 1:ep plan chosen. At most, premium credit recipients will be required to pay 9.5% of their income for a benchmark plan. An additional premium will be payable Ir if a more expensive plan is selected. To be eligible for a pren-dum credit, a taxpayer generally must:
- Meet specific income criteria (household income between 100% and 400% of the federal poverty level, or FPL*)
- Buy a plan offered through the exchange and not receive any employer contribution toward the plan\’s cost
- Not have the ability to secure minimum essential coverage elsewhere except by purchasing a plan in the individual health insurance market or enrolling in an employer-sponsored plan that is \”unaffordable\” or does not provide \”minimum value\”
An employer-sponsored plan is considered affordable if an employee is required to contribute no more than 9.5% of household income toward the premium for self-only coverage. An employer plan provides minimum value if the plan\’s payments cover at least 60% of the total allowed costs (on average).
Taxpayers who receive premium credits won\’t have to wait until they file their federal income-tax . returns to benefit. Instead, the IRS will send advance payments of credit amounts directly to the insurers providing coverage. The advance payments for 2014 generally will be calculated using information from the taxpayer\’s return for 2012. However, the actual credit amount will be determined on the taxpayer\’s return for the , current year (e.g., 2014) using the current year\’s income. As a result, credit recipients may receive an additional credit (a reduction in tax) or be required to repay an excess credit (assessed as an additional tax) if their income has changed.
With certain exceptions, individuals who don\’t maintain minimum essential coverage for themselves and their dependents will face penalties for noncompliance. When it applies, the penalty will be due with the federal income-tax return filed for the year.
Here\’s a quick tip for anyone who has investments in a taxable account: It\’s not too soon to review your 2013 transactions to assess your capital gain and loss situation.
Capital gains and losses are netted for tax purposes. So, although no one likes to lose money on an investment, at least capital losses can provide a benefit by reducing the capital gain you\’ll pay tax on. Excess losses that aren\’t used to offset gains are deductible against up to $3,000* of ordinary income annually (with a carryover to future tax years).
Suppose your review reveals that you have more capital gains than losses. That\’s good, but the IRS will want some of that profit at tax time. Check your portfolio for securities that are showing paper losses. If there are any you\’d like to sell, consider taking enough losses to offset your excess gains. Avoid basing your decision solely on taxes, however.
* $1,500 for a married person filing separately
* FPL figures are adjusted annually. In 2013, for residents of the contiguous 48 states and the District of Columbia, 400% of the FPL (the income level above which no credit is available) is $45,960 for a one-person household, $62,040 for a two-person household, $78,120 for a three-person household, $94,200 for a four-person household, and over $100,000 for larger households. The FPL is higher for residents of Alaska and Hawaii.