ObamaCare's Tax Credit System Will Make April 15 Even Harder
September 29, 2010
Due to ObamaCare, millions of Americans may need to spend even more time on the income tax returns that they file in 2015 and beyond -- and many will discover they owe the tax man more than before, says Investor's Business Daily (IBD).
- Beginning in 2014, individuals and families earning 100 percent to 400 percent of the federal poverty level are eligible for a federal tax credit to buy insurance via a health insurance exchange.
- The amount of the credit is based on a sliding scale and decreases as income gets closer to 400 percent of the poverty line.
- Ultimately, the size of the tax credit an individual or family receives in 2014 will be based on 2014 income, but initially it will be based on the income reported on the 2012 tax return, filed in 2013.
"In the meantime, your income may have risen or fallen," said Devon Herrick, senior fellow with the National Center for Policy Analysis. "If it's risen, then you may have gotten more of subsidy than you deserve and you'll owe money on your next tax return. If your income has fallen, you could apply for a tax rebate on your return."
How many Americans will see their income taxes affected could be substantial, says IBD.
According to Stephen Shore, a professor of economics at Johns Hopkins University:
- Most households have income changes bigger than 5 percent to 10 percent year to year, up or down.
- About 20 percent of households had an income change of at least 50 percent, up or down, over a one-year period, according to the Panel Study of Income Dynamics.
- These aren't necessarily big lifestyle shocks -- they are often due to bonuses, a spouse leaving work to have children, or a person leaving school and entering the workforce.
Making sure the tax credit is properly applied will pose serious challenges for the IRS, say some experts.
Source: David Hogberg, "ObamaCare's Tax Credit System Will Make April 15 Even Harder," Investor's Business Daily, September 27, 2010.
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