Over the past year, millions of Americans have been able to obtain relatively low-cost health coverage as a result of signing up for the insurance they purchased through the Patient Protection and Affordable Care Act's mandated exchanges. However, what many people who did so might not know is that this will probably also have a huge impact on their annual tax liabilities, and those changes will certainly have to be accounted for when they submit all their documentation to the Internal Revenue Service.
The way that buying coverage through the ACA's health insurance exchange marketplaces can impact a tax filing is simple. The vast majority of the 8 million people who signed up were slated to receive at least some sort of financial assistance from the federal government. This benefit could be received in one of two ways: that was through a subsidy that could be paid right from the government to their insurers every month, or via a tax credit for the value of that subsidy, which would serve to reduce a person's liability at the end of the year.
Some potential issues
However, it's important to note that when people submitted their information to the exchanges, they were asked to estimate their income and other aspects of their financial lives, and that data was used to determine the size of the subsidy or tax credit they received. So if a person estimated they would make $35,000 this year, that's what the benefit they received would have been throughout 2014. But many consumers who signed up might have had their circumstances change in some way, either because they lost a job, got a raise, had a child, got married, or had some other event take place that altered their status.
Such changes could have a major impact on their situations with regard to their allowable benefit - potentially either increasing or decreasing it - as it would for many other aspects of their tax filing status. So for consumers who received such benefits from the federal government for their health insurance, it might be wise to work with a tax consultant as soon as possible to figure out what the impact will be when filing season rolls around. Further, those who plan to continue buying coverage in this way might want to work with such a professional throughout the year to make sure they don't encounter any potential problems in the future as well.