QUESTION

The Marketplace is asking me to project my annual income, but I’m not sure what my income will be next year. What can I do?

Transitions from Medicaid to Private Insurance | Transitions from Medicaid to Private Insurance |
ANSWER

Often a good place to start is to consider what your income is this year, or what income you reported on your tax return last year. However, if your circumstances have changed since then (for example, if you recently lost your job), you should make your best estimate of what your income will be next year.

Documentation

The health insurance Marketplace will compare your income estimates against records at the Internal Revenue Service, Social Security Administration, and other sources. If your estimate and official records don’t match, but you meet all other eligibility requirements, you will be asked to provide documentation to support your income projections. If you don’t have that documentation handy, the Marketplace will provide premium tax credits for up to 90 days while you gather and submit your documentation for verification. It is very important that you provide any documentation requested by the Marketplace in a timely manner; if you don’t, your premium tax credits might be reduced or terminated. If you are having problems getting the documentation, you can request an extension from the Marketplace.

Reporting Changes

It’s common for income to fluctuate, particularly if you are self-employed, perform seasonal work, or have multiple jobs. To achieve the most accurate premium tax credit amount, you should report income changes to the health insurance Marketplace within 30 days.

Consequences for Underestimating Income

If you estimate your income incorrectly and end up claiming more help than you are eligible for, you may have to pay back some or all of the premium tax credits you received. To avoid having to pay back any premium tax credits, you could consider waiting until you file your taxes to take all or a portion of the premium tax credit on your tax return instead of receiving advance payments.

Relief for Overestimating Income

If you overestimate your income and end up claiming less help than you are entitled to, the difference will be refunded to you when you file your income taxes the following year. Also, if your annual income as reported on your taxes is below the income cut off for Medicaid eligibility, you do not have to pay back the premium tax credits you received. For example, if you projected your income to be 140 percent of the federal poverty level, but your annual income is actually 130 percent of the federal poverty level (making you eligible for Medicaid), you do not have to pay back the premium tax credit you received. In fact, your final credit amount will likely be larger than the amount you received in advance. Note that if you end up making more than you projected on your application, and were not eligible for the amount of premium tax credits you received, you may have to pay back a portion of those tax credits.

(IRS, Questions and Answers on the Premium Tax Credit; CMS, Failure to File and Reconcile (FTR) Operations Flexibilities for Plan Year 2023; 45 C.F.R. §§ 155.310(k), 155.320(c), 155.340; 26 C.F.R. § 1.36B-4).

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