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Did You Receive a Subsidy from a Health Insurance Exchange? Here’s How to Report It on Your Freelance Taxes

Did you receive a subsidy from a health exchange in 2023? If so, you must report it on your tax return. The IRS is making this very clear with recent mailed reminders.

What else do you need to know? Here are some key points related to health care information forms and the reporting you do on your 2023 freelance tax return:

1. Make sure you keep track and report the amounts on all Health Care Information Forms you may have received. These may include

    • Form 1095-A: Health Insurance Marketplace Statement
    • Form 1095-B: Health Coverage
    • Form 1095-C: Employer-Provided Health Insurance Offer and Coverage  If you did not receive these forms by January 31 (when they are due to be sent), you do not need to wait for them to file your taxes

If you did not receive these forms by January 31 (when they are due to be sent), you do not need to wait for them to file your taxes.

2. Beware of the shared responsibility payment if you are filing retroactive returns. The individual shared responsibility provision which affects returns for tax years 2014-2018 at the federal level requires taxpayers to do at least one of the following:

  • Have qualifying health coverage called minimum essential coverage.
  • Qualify for a health coverage exemption.
  • Make a shared responsibility payment with their federal income tax return for the months that without coverage or an exemption.

The individual shared responsibility penalty was eliminated at the federal level after the end of 2018. However, some states implemented their own individual mandates and associated penalties for 2019 and beyond including New Jersey and Rhode Island, so be sure to check your own state taxation department to see if this requirement applies to your state tax return.

3. The Premium Tax Credit (PTC) is a refundable credit that helps eligible individuals and families cover health insurance premiums purchased through the Health Insurance Marketplace. If you received a subsidy, you must file  Form 8962 to account for the subsidy.  Failure to do so will result in the IRS sending you a letter asking for missing information.

The amount of the monthly premium tax credit for 2023 is the lesser of (1) the monthly premium for a qualified plan in which you and your spouse, and any dependents are enrolled, or (2) the excess, if any, of the premium for the second-lowest-cost silver plan that is available on the exchange in your area  over an amount equal to 1/12th of a specified percentage of your household income for the year, in accordance with the brackets of the federal poverty level (FPL) as noted here. If you received too much of a subsidy, you will need to repay the excess premium tax credit  via your tax return. If you did not receive enough of a subsidy,  you  will receive a net premium credit on your tax return.

The most important thing to keep in mind this tax season is to accurately report any subsidies received and follow the IRS guidelines to ensure a smooth tax filing process. If you have specific questions or need further assistance, consider seeking advice from a tax professional.

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Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.

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