As the end of the year approaches, I'm hearing from many readers who worry they may have to pay back all or some of the tax subsidy they received in 2014 to help pay for health insurance. And it's not because they earned too much money this past year, but too little. My quick answer, to ease their minds: No, you won't. In fact, you may get a little extra subsidy at tax time this year.



To understand why they are worried, it helps to step back for a minute. Under the Affordable Care Act, people whose incomes are between 100 percent and 400 percent of the Federal Poverty Level can receive tax credits to offset the cost of health insurance. (Here’s a chart with the numbers.) The assumption was that people who made less than 100 percent of the poverty level would get insurance through expanded Medicaid coverage, which was also part of the health care law. But many states decided to not expand Medicaid after a Supreme Court decision gave them that option. And in those states, households with incomes below the poverty limit cutoff fall into the dreaded “coverage gap”—too poor to get tax credits but unable to get Medicaid.

The readers I'm hearing from live in those states that did not expand Medicaid. And as they tally up their 2014 income, they are realizing that they ended up making less than they expected, and their income for the year will be under Federal Poverty Limit. They're afraid that when they file their tax return and the government finds out how little they earned they'll be forced to pay back their premium tax subsidy.



But experts in the health law say not to worry. “The Internal Revenue Service has a special rule about this,” explains Tara Straw, at the Center on Budget and Policy Priorities, a Washington think tank. “If you bought coverage on the Marketplace, got tax credits, and ended up with an income below the poverty line, then you still get your credit. In fact, you’re going to get a refund because your credit was based on a higher amount than you actually earned.”