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Many real estate pros will qualify for Obamacare credits

Real Estate Tax Talk

Will you be among the 28.6 million Americans who will qualify under Obamacare  (The Patient Protection and Affordable Care Act) for health care credits to purchase health insurance starting in 2014?

Take a look at the following chart. If your household income is no more than the amount listed in the second column, you earn less than four times the federal poverty level, and will qualify.

It’s likely that more than a few real estate professionals will qualify. For example, if you’re a single real estate pro and have no more than $45,960 in income in 2014, you’ll qualify for a health care credit. A family of four can earn as much as $94,200 and qualify.

 Household size 400 percent of poverty level
 1 $45,960
 2 $62,040
 3 $78,120
 4 $94,200
 5 $110,280
 6 $126,360
 7 $142,440
 8 $158,520
 For each additional person, add $16,080

Although they are called credits, these payments made under Obamacare are really a government-funded subsidy. You don’t need to owe any income taxes to receive the credit.

Moreover, it’s paid directly to your health insurance company, not to you when you enroll in your health insurance plan. This means that you will not need to wait until your taxes have been filed and processed to receive the credit; nor will you need to pay the full premium when you purchase health insurance and then wait to be reimbursed.

How much is the credit? It depends on your household size and income. Those with the lowest incomes will receive the largest tax credits. You can get an idea of how big a credit you’ll qualify for by using the Kaiser Family Foundation Health Reform Subsidy Calculator. Plug in your income numbers and the calculator will give you an estimate of your subsidy. For example:

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  • a single with $35,000 in income in 2014 would qualify for annual credit of about $1,033
  • a family of two with $60,000 in income would qualify for a credit of about $2,370, and
  • a family of four with $90,000 in annual income in 2014 would get a $3,353 credit.

If you already have health coverage through an employer or your spouse’s employer, you won’t need or qualify for the health insurance credits, subject to two important exceptions:

It's likely that more than a few real estate professionals will qualify for health care credits.
  • your employer’s health plan covers less than 60 percent of the cost of covered benefits, or
  • your share of the employer’s premium that you must pay from your own pocket is over 9.5 percent of your income.

If either exception applies, you may enroll in a plan through your state health insurance exchange and be eligible for premium and cost-sharing subsidies.

If you qualify for the credit, it will help offset the expected increase in the cost of health insurance for individuals and small groups in 2014. For example, average  premiums are predicted to rise by 14 percent in California in 2014. (Source: Factors Affecting Individual Premium Rates in 2014 for California.)

There are several reasons for the expected premium increases. One is Obamacare’s prohibition of preexisting condition restrictions by health insurers. Another is the mandate that all health insurance provide minimal health benefits that are far more generous than those currently offered.

Self-employed individuals and businesses will be able to purchase health insurance through state online health insurance exchanges.  Each state will have its own exchange. Each state’s exchange is supposed to be up and running on Oct. 1, 2013, and you’ll be able to enroll in a health plan with coverage starting in January 1, 2014. For details, visit HealthCare.gov/marketplace.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including “Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants,” “Deduct It,” “Working as an Independent Contractor,” and “Working with Independent Contractors.” He welcomes your questions for this weekly column.