LedgerCore Financial

Tax Talk Tuesdays!

We get many questions during tax season (and throughout the year), and we’ll be sharing some of them - and the answers - here through April 15th!

Question:
In 2025 I was eligible for health insurance premium subsidies through the Affordable Care Act. Turns out that in 2026, I'm not. How can that be when I made even less in 2025 than I did in 2024?

Answer:
Eligibility for premium subsidies is determined by your level of income in the prior year. If you made between 100% and 400% of poverty-level income, you are eligible for premium subsidies... for single, childless taxpayers, that translates to between $15,650 and $62,600

This means that if you are single and make less than $15,650, you are *not* eligible for health insurance premium subsidies because you are supposed to be eligible for state-administered expanded Medicaid.

The problem is that not every state has adopted the Medicaid expansion. To date, 10 states - including Texas - have declined to do so.

In states wherein Medicaid expansion was not adopted, the only option for health insurance coverage if you earn at or below poverty is to pay full price. It translates that these folks in non-adopting states do not get health insurance; it is completely unaffordable. Instead, they go without healthcare, or they only seek healthcare in emergencies.

As always, ask your tax preparer for more information!

Tax Talk Tuesdays!

We get many questions during tax season (and throughout the year), and we’ll be sharing some of them - and the answers - here through April 15th:

Question:
What is this large chunk of money I owe to the IRS for something called Repayment of Advance Premium Tax Credit? Without it, I would have gotten a refund!

Answer:
In a nutshell, the IRS is making you pay back discounts that reduced your monthly health insurance premiums last year because it turns out you weren’t eligible to receive them.

To better understand this, a simplified overview may help:

1. To make health insurance affordable for everyone, the federal government subsidizes the premiums of ACA marketplace policies for some taxpayers: if a taxpayer’s total household income is less than 401% of the federal poverty line, they will receive a tax credit on their tax return for the year in which they had an ACA policy.

2. That’s all well and good, but a tax credit that increases your 2025 refund - a refund you can’t even receive until early 2026 - is practically useless in helping someone to afford monthly health insurance premiums that are due January through December of 2025!

3. So, they came up with the “Advance Premium Tax Payment” (APTC): During the annual re-enrollment (or original enrollment) for an ACA health insurance policy, the taxpayer tells the system what they think their total household income will be for the year. If that figure is below 401% of the federal poverty line, the marketplace website calculates what the Premium Tax Credit will be on their tax return and then reduces the monthly premium amount accordingly.

If the actual total household income is substantially greater than the estimate, the taxpayer is required to pay back the difference between the estimated tax credit and the actual tax credit.

As always, ask your tax preparer for more information!

Over the next several weeks, we are going to go through the tax implications of the so-called “Big Beautiful Bill” recently made law.

Stay tuned…

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