This post may contain affiliate links. Please read our disclosure for more information.
My taxes are easy. Pension income plus dividend income minus standard deductions and personal exemptions for a married couple filing jointly times ten percent. So I do my taxes myself and file online using one of the IRS’s free software tools.
In the previous two years, it took me about an hour to do my taxes. This year, however, it took about an hour and a half. Obamacare added one little layer of complexity. I had to figure out if the subsidies Mrs. Groovy and I received for our healthcare premiums were correct. Here’s how that calculation went down.
Calculating the Correct Obamacare Subsidy
When Mrs. Groovy and I signed up for Obamacare, we estimated that our 2017 adjusted gross income (AGI) would be $30,000. This estimated AGI entitled us to a monthly premium subsidy of $1,948 for our Silver Blue Cross-Blue Shield plan, nearly 95% of the plan’s cost. But because of larger than expected pension and dividend payouts, our actual AGI for 2017 was $33,615.
Since our AGI for 2017 was larger than we estimated, our Obamacare subsidy was too dear. We owed the feds some money. But how much?
Hello IRS form 8962. This is the form all Obamacare recipients must include in their tax returns and it’s rather straight forward.
Step One: Divide AGI by the Federal Poverty Line for Your Household
As per form 8962 instructions, the federal poverty line for a household of two in 2017 was $16,020.
33,615 ÷ 16,020 = 2.09831.
Step Two: Take Result from Step One and Multiply It by 100
2.09831 x 100 = 209.831.
The feds don’t care about the numbers after the decimal point. All they care about are the numbers before the decimal point. So my result in step two was 209. This in turn means our household income was 209% of the federal poverty line.
Step Three: Find the “Applicable Figure” for the Step Two Result
As per form 8962 instructions, the “applicable figure” for 209% is 0.0675.
Step Four: Multiple Your AGI by the Applicable Figure to Determine Your Annual Contribution Amount
$33,615 x 0.0675 = $2,269.
Step Five: Subtract Your Annual Contribution Amount from the Annual Applicable SLCSP Premium
SLCSP stands for the second lowest cost Silver plan, and I really don’t know what the eff that is or how it’s effing determined. But that’s okay. The Obamacare Exchange sent me form 1095-A, and line 33B on form 1095-A said our annual applicable SLCSP premium for 2017 was $25,047.
Okay, with the annual applicable SLCSP premium graciously provided, all I had to do was subtract our annual contribution amount from it.
$25,047 – $2,269 = $22,778.
According to form 8962, my $22,778 result is deemed the annual premium tax credit allowed. In normal talk, this is the total premium subsidies we were entitled to in 2017.
Step Six: Subtract the Annual Premium Tax Credit Allowed from the Annual Advance Payment of Premium Tax Credit
The annual advance payment of premium tax credit is just the sum of all our monthly premium subsidies. Since we received a subsidy of $1,948 a month, our total premium subsides for 2017 came to $23,376. But according to step five, we were only entitled to total premium subsidies of $22,778.
$23,376 (what we got) – $22,778 (what we should have gotten) = $598.
So there you have it. We had to send the feds $598 to make up for a larger-than-appropriate Obamacare subsidy. I’m not complaining, mind you. We paid $115.33 a month for our Blue Cross-Blue Shield policy in 2017. Spread the $598 refund over 12 months and the final monthly cost of our healthcare insurance in 2017 came to $165.16. For two people on the cusp of 60, that was ridiculously cheap.
Sasha
This week in Crooked Creek Park, Mrs. Groovy and I ran into a number of our four-legged friends—Thelma and Louise and Sterling. And we also met a new friend, Sasha. Sasha is a six-month old Siberian Husky who was in the park with her mommy, Allison. Check out the picture below. We loved Sasha because she was so unique. It was the first time we ever came across a brown husky in person. What a beautiful dog.
Talking Trash
Okay, groovy freedomist, that’s all I got. In this week’s Talking Trash episode, Mrs. Groovy and I discuss step two of our Groovy Guide to Geoarbitrage. Have a groovy weekend. Peace.
That is a good deal for Blue Cross coverage, but what does the future hold for the ACA? Surely the soap opera has not played out.
It’s gonna be interesting. Sooner or later the entire health insurance model will change, IMO. I believe it will improve, but I fear it will worsen before that happens.
I have an at-risk retirement health benefit that allows me to buy through the employee plan. At- risk because of company mergers and a year by year decision whether they want to continue allowing retirees to do it. This year it’s up to $1060 a month, OUCH! If ACA remains an option I will definitely go that route if I lose my benefit. Your post clears up a few things on how it works.
If you need any tips navigating the system shoot me an email. I’m not an expert but I’ve investigated a few different angles. For instance, if your company offers COBRA you can take the benefit without actually paying the premium, and then retroactively pay it should you need it. I believe you have 60 days to accept and then another 30 days to pay. And you’re not considered enrolled until you pay. You just have to time it right with the ACA open enrollment period or you could be stuck with COBRA. Losing employer insurance would trigger a special circumstance for enrolling but terminating COBRA on your own because you can’t afford it would not.
Crazy Uncle Sam making everything completely absurdly difficult. Aaarrgh!!! Sasha is gergeius? Any update on Fluffy, the dog that may or not be in the right house? 😊
A few other dog owners we’ve met said they’ve also seen Fluffy in the same area and thought he belonged in one of the houses at the tip of the park. There’s a good chance we returned him to the correct home. One said she asked a sheriff (they seem to like this park for lunch) to do something about Fluffy but he wouldn’t. Perhaps he knows where Fluffy belongs. I’m glad he wouldn’t because I don’t know how long they keep dogs at the shelter before you-know-what. If we were up for a dog now I would steal Fluffy the next time we see him and not think twice, as we could be saving his life.
$598 is not bad at all. We owe over $10,000 this year. I can’t complain because I made much more than the previous year. Oh well. Obamacare is giving you nice subsidy.
Yeah, I’d go for a silver plan too. It’s not much more and you can afford it.
True, my friend. Labor Day is even more important to me now. Because my fellow Americans work so hard and are so generous, I have ridiculously cheap healthcare. Mrs. G and I owe the taxpayers a lot.
No Obamacare subsidies here, still employee provided insurance for us. Have you scouted out parks, in the new Groovy homestead area? Crooked Creek Park, has been such a staple in Talking Trash. White Castles always attracts interesting characters, especially at the wee hours of the morning.
Brian recently posted…How A Poor Credit Score Can Ruin Your Retirement
Haha! I learned long ago never to visit White Castle after 10 pm. The creepy factor goes up exponentially at night. And, yes, we have checked out the parks in Louisburg. It looks like Joyner Park will be our new stomping grounds. And sadly there’s plenty a litter to pick up in Louisburg too. Americans are very adept at making litter.
Glad to hear you’ve got a new park lined up, sorry to hear this is plenty of litter waiting. 🙁
Brian recently posted…How A Poor Credit Score Can Ruin Your Retirement
Your timing couldn’t be better Mr. G. We are getting ready to submit our application for Obamacare in the next couple of weeks and you’ve answered several of my questions. The while MAGI and subsidies calculation are mind boggling.
Hey, Mr. G. It looks like the sweet spot for Obamacare subsidies is an AGI between 150% and 200% of the federal poverty level. For 2018, the federal poverty level for a household of 2 is $16,240. So if you can keep your AGI between $24,360 and $32,480, you and Mrs. G should have very reasonable monthly premiums. Check out this post from the Root of Good. He explains it a lot better than I do.
Don’t Fall Off The Affordable Care Act Subsidy Cliffs
Hi Mr. Groovy!
That is an awesome husky! Lily and I love dogs.
And hate doing taxes. We use an accountant, because we have a complicated situation involving foreign tax credits. Even then, I study the tax law in order to double-check his work.
Ok, mini-rant over. Thanks for the husky pic, it made me smile 🙂
Cheers,
Miguel
Your mini-rants are always welcomed here, Miguel. And you are so right about Sasha. Beautiful dog.
You really ought to consider getting a Bronze plan. In your area, it looks like you would pay about $600 per month less. Yes, your maximum out-of-pocket on a bad year would be about $7000 more. But you are voluntarily paying that every year in larger premiums. That’s why if you buy a plan that costs less than that SLCSP, there is a lot of savings. That’s what we’ve been doing for 4 years. It’s similar to raising the deductable on home insurance. Pays for itself.
Haha! I love the way your mind works, Susan. But here’s the problem. When it comes to investing in the stock market, I’m the wuss. When it comes to health insurance, Mrs. G is the wuss. We’re very healthy, so I would much prefer the Bronze plan with a high deductible and HSA eligibility. Mrs. G, however, can’t stomach the idea of an $11,000 deductible. She wouldn’t be able to sleep at night. So for the foreseeable future, we’re going to be Silver people. Meh. Thanks for stopping by, Susan. Have a great weekend. Cheers.
Susan, we could pay -0- a month for a bronze plan. Right now we pay $123/month and I’m fine with that for the level of insurance we’re getting. You get much more bang for your buck on a silver plan if you’re subsidized. On a bronze plan our deductible would be over $13K. Ours right now is $2,000.
Dearest husband –I’m going to say that expression that Mrs. Wow loves so much — You’re an idiot! I’m not rolling the dice on spending $20K on hospital bills for a broken ankle if you fall off a ladder. If you want to invest more money, put it in our taxable account. Health insurance should not be used primarily as an investment tool when you’re over 50. You do remember you’re over 50, don’t you?
Mrs. Groovy recently posted…Taxes and Obamacare and Sasha and Talking Trash
You guys have a much better deal on the Silver plans than we do here in California. Another win for Geoarbitrage! And I think Mrs. Groovy might be able to get another point on the Fight-O-Meter, except this one isn’t house related.
My heart weeps. I thought you were on my side, Susan.
I am completely on your side Mr. Groovy, standing corrected by Mrs. Groovy!
Have to agree Mr. G. That is some affordable health care insurance from an out of pocket standpoint. Judging from the gross cost, it must be a pretty robust plan as well. Tom
Tom @ Dividends Diversify recently posted…The Dividend Deep Dive
It’s a very robust plan, Tom. Mr. Groovy wanted to go with a high deductible HSA plan for the financial benefit of investing. In retrospect that would have worked out well for 2017 given the few medical services we received. But since we don’t own a crystal ball, I stood firm on viewing our health insurance plan as needing to cover real health issues, should we have any, rather than using it as an investment tool.
In 2017, our Blue Cross-Blue Shield policy cost $24,760. We paid $1,982 toward that premium and the feds picked up the rest. It’s insanity. And here’s the really galling part, Blue Cross-Blue Shield is losing money on its ACA policies. How? In 2017, Mrs. G and I each had a wellness exam and a dermatology exam. Mrs. G had a gynecology exam. All five exams were routine. No issues were discovered. The cost of those five exams were about a $1,000. Now either the typical ACA recipient in NC is far less healthy than either Mrs. G or I, or Blue Cross-Blue Shield is terribly inefficient. Somethings not right.
Thanks for this great step-by-step Mr. G! We may need to refer to this when we file our 2018 taxes.
We’re starting the Obamacare sign-up process in early April.
Sasha is very pretty!
Hey, Mrs. G. Thank you. That’s why I laid out the correct Obamacare subsidy calculation. I figured it would be of interest to a lot of people. So excited for you guys. Only one month away from Obamacare and freedom. Signing up for Obamacare is a breeze. All the kinks have been ironed out. You’ll definitely have to do a post about it. Anyway, have a great weekend. And give my regards to Mr. G. Cheers.
You lost me at “So I do my taxes myself”… My eyes just went glossy until I saw the puppy!
p.s. glad you didn’t have to pay in too much. (you technically got an interest free loan from the gov 😉 )
Budget On a Stick recently posted…BoaS Question Series – Episode 0
Haha! If it weren’t for Sasha, this post would have really bombed. And good point about the interest free loan. That’s the proper way to look at any “refund.” Have a great weekend, my friend. Cheers.
That’s for sharing. That’s quite a deal for health insurance in this day and age for a couple that’s loving the dream. How have the changes in the tax plan impacted your payment amount in 2018?
Jason@WinningPersonalFinance recently posted…Does Your Car Cost You Millions?
Hey, Jason. The tax changes have had no material effect yet. Here’s what Obamacare looks like for us in 2018.
Current monthly premium contribution: $123.62
Current monthly subsidy: $2,394
Estimated AGI for 2018: $30K
Federal Poverty Line: $16,240
Income as Percentage of Federal Poverty Line: 184%
If our AGI does come in at $30K, and it should, we should be square with the feds this year. No Obamacare refund in our 2018 tax return. But we’ll see. I have to hedge my bets. Things are so damn convoluted, I may have missed something. Thanks for stopping by, Jason. Have a wonderful weekend. Cheers.
Not being from the US, I don’t know how much healthcare typically costs. I do know that if I buy travel insurance, it is more expensive if US is included because of the cost of healthcare.
Just to give me an outline understanding, what do you think annual healthcare insurance would cost for a couple around 50 years old, with a joint income of say $90k or $100k. Don’t do any research on my account, just a very ball park figure if you have one (no probs if not). Knowing would help me understand some of the US posts better. Thanks 🙂
David, based on income you would not qualify for the ACA (Affordable Care Act/Obamacare) subsidies. You would pay full cost. The full cost of our health insurance plan was $24,760 for 2017. We paid $1982 out of that. But, this is a very inflated price. Prior to Obamacare, our plan would not have cost that much. (Just FYI if we had just paid out of pocket, with no insurance, for all the medical services we received combined in 2017, we would have spent less than that $1982.)
The penalty for not having ACA compliant health insurance is going away so you would be able to purchase any plan you can find on the open market. Those plans are not based on income — they’re based on age and gender. For us, we’ll need to see if the subsidies remain and how the open market adjusts — and also what happens if the ACA rules continue to change.
***Special note: The Obamacare penalty is still in effect for 2018. It goes away in 2019.
Things are very sad over here when it comes to healthcare. No price transparency + no competition + plus a lot of government involvement = one giant f*cking expensive mess.
That can’t be right. The government is here to help!
The Vigilante recently posted…Money and More: Instructions for Baby Vigilante
Thanks guys. I must be a bit of a weirdo as I just got some quotes out of interest (I guess I’m about to receive a bunch of spam email for no real reason!).
I pretended I lived in Boulder, figured that was a cool place to live(?), and the cheapest quotes were $820 for Bronze and $965 for silver for Sally and myself (using our real ages of 43 and 48).
Why I think you may want to know this is a mystery🤣 but as I did the research, I had to show someone, and Sally wasn’t showing any interest!
I’m interested!
I’ve never used any of the state sites but I just checked out Colorado’s. I plugged in a Boulder zip, used age 50 for the both of you and $90,000 income which is what you originally asked about. I also selected medium health coverage. The plans that came up range from $922/mo to $2,100/mo. The deductibles range from around 10K to $13K on the plans in the lower range premium, and around $2-4K with the high premiums. A silver plan that’s comparable to ours would currently cost you app. $1400/month with a $4K deductible (if you both were currently 50 with a combined income of 90K).
It ain’t cheap for sure, but it doesn’t necessarily blow our budget. Maybe I should check Boulder out just for fun, although I suspect not the smartest geo-arbitrage low-cation (I’m trying to get in on the new word craze!)
Haha I have to agree with Cubert on this one, but I LOVE IT!
Taxes make my head spin, but I love reading material that further educates my knowledge on a subject that I am not very good with. Matter of fact, I still need to file!
Looks like date night this weekend will have to wait…
Haha! Sasha saves the day! Have a great weekend, Sean. And please don’t forego date night. When Mrs. G read your comment, tears welled up in her eyes and she screamed hysterically, “No, No, No!!!”
I’ve been doing the Obamacare Subsidy dance since Obamacare first came out. What could be easier? 🙂
Generally, Obamacare has worked out well for us since we FIREd in 2012, but we really haven’t had any major health crisis either. So I count us as lucky.
Mr. Freaky Frugal recently posted…Automation is coming to a job near you
Agreed. As long as you’re healthy, Obamacare is great. But I suppose virtually free healthcare would still be great even if you were unhealthy. Always great hearing from a fellow Obamacare recipient. Have a great weekend, my friend.
Thanks for making my head hurt at 6:20 AM on a FRIDAY. I’m glad I could scroll down to Sasha to feel a little bit better. 😉
Seriously though – I’m glad you could share this experience, since we’ll be (likely) in a similar situation a year and a half from now. Holding on TIGHT.
Sorry, Cubert. That is a lot numbers and bureaucratic gibberish for early in the morning. That’s why I included Sasha in the post. She saved the day. Have a great weekend, my friend.