What income is the ACA subsidy based on?

[nawhite]

So lets say my jointly filed return shows $140k/year gross (~$115k MAGI) now for 2013 and the 2014 return would be a MAGI of $125k. I retire on December 31st and get a new ACA plan that goes into effect on January 1st. Our retirement MAGI is a mustachian $23k/year.

For 2015, for health insurance do I

A) Pay full price for my plan based on my 2013 tax return because that is the only Income that the IRS has for me. Then get a GIGANTIC refund when I file my 2015 tax return. Since I wont have a return on file with the IRS that says I only made 23k until April 2016, will I have to pay full price (up-front) until January 2017?

B) Tell someone (who??) that I expect my 2015 income to be around $23k when I sign up for my plan which starts on January 1st 2015. Then pay the subsidized rate for that plan and be good at tax time.

Basically I'm curious if I need to have enough cash float when I retire to cover the full unsubsidized rates for up to 2 years. Sure I'll get it back when I file my taxes but I'd rather not need to float close to $4500 to the government if I don't need to.

[geekette]

When we signed up just a few weeks ago (we've been on Cobra), I put in our expected MAGI for 2014 on the application.  Even though our 2013 tax return showed a much higher amount, we did qualify for up front subsidies based on our estimated MAGI.

Because I don't know if DH will go back to work and we have cash on hand, we're currently going with choice A. 

[nawhite]

When we signed up just a few weeks ago (we've been on Cobra), I put in our expected MAGI for 2014 on the application.  Even though our 2013 tax return showed a much higher amount, we did qualify for up front subsidies based on our estimated MAGI.

Because I don't know if DH will go back to work and we have cash on hand, we're currently going with choice A.

Good to know geekette. Does anyone know if it will continue to be this way or are they just allowing you to put your "expected" MAGI this year because it is the first?

[Cassie]

From what I understand if your income is higher then what you projected you will just owe the $ and have to pay it back.

[garrettld]

There are tons of charitable groups that have organized to help people sign up with the new system, and the federal and state exchanges have people that will help you out on the phone or in person.

I live in Kentucky and our system is called "Kynect" so I can just use their website or just go to their downtown office to locate a "Kynector" that will help me sign up and is qualified to answer questions like yours. If you're concerned about this or anything else, finding someone to talk to  either on the phone (1-800-318-2596 for the federal helpline) or in person is your best option.

Kentucky lets me pick whether I want a subsidy now or a tax credit in April, and I can tell them what I expect my income to be and get my subsidy based on that. I can also update my expected income throughout the year as many times as I want for any reason at all, whether it's job loss, a raise, or just because I want to. It may be different in your state.