Question about reconciling ACA subsidies on 2019 taxes

[Trifle]

OK this is a naive question, but this is our first year on the Exchange for health insurance and I haven't done it before.

We're on the Exchange for insurance, and receiving subsidies based on my estimated 2019 income.  Our subsidy more than covers our selected plan, so we have not paid any premiums this year.  Let's say I end up earning a bit less than I predicted for 2019, so when the dust settles our health insurance subsidy ends up being BIGGER for 2019 than what we've been getting.  When we file our 2019 taxes, do we literally get that difference back in the form of lower taxes or a tax refund?

Somehow it seems like that can't be right, even though what I read seems to indicate it is.  Maybe I am being thrown off by the fact that our current subsidy is already large enough to cover our plan?

Thanks all!

[Roland of Gilead]

Not totally sure but I don't think you can get back more than what the policy costs.

[seattlecyclone]

Not totally sure but I don't think you can get back more than what the policy costs.

This is right. If you were still paying premiums and ended up with a lower income than you estimated, then you would get some additional subsidy added into your tax refund. Since you're paying nothing as is, there's not going to be any more money coming back to you.

Given this fact, maybe now would be a good opportunity to realize some extra income before the end of the year. Do some capital gain harvesting or Roth conversions up to the point where your premiums wouldn't be free anymore. There's a good chance you'll pay less on this income now than if you wait until a future year where your chosen health plan ends up costing more than your subsidy.

[Trifle]

Thank you @Roland of Gilead and @seattlecyclone!  We are right at the income point where a bronze family plan is covered by our subsidy, so unfortunately not a ton of room to do what you suggest. 

Next year our income will be a lot lower and we will have a lot more room to increase income by doing conversions without jeopardizing subsidies.  I've been thinking we should do some IRA conversions next year to increase income and stay off Medicaid.  Thanks -- you've given me a lot to think about.  Your comments have really helped me clarify this in my mind.

[MissNancyPryor]

Thanks for starting this thread, I also am doing my first few months on the exchange and have a question along that line.  This year I paid full freight because I had W-2 wages but next year I will be living on dividends and cap gains.  The capital gains will be from mutual funds that have some churn and the exact amount won't show up till December 2020 so it remains as a guess.  I don't plan to sell any stock yet in my drawdown plan so that constitutes my total income.  So for this scenario:

Let's say I overestimated my div/CG income for 2020 and end up with a lower subsidy than what will ultimately be reconciled. 

On top of that I may end up owing zero taxes on my investment income next year because the realized gains are low.

Does the government end up sending me additional money as a "refund" on my tax return to make up for the subsidy shortfall?   

[seattlecyclone]

Does the government end up sending me additional money as a "refund" on my tax return to make up for the subsidy shortfall?   

Yes. This calculation to reconcile your estimated vs. actual subsidy ends up on your tax return. If your estimated income was too low, you'll have to pay some back as an additional tax. If your estimated income was too high, you'll get a refundable tax credit for the difference.

[MissNancyPryor]

Thanks for the info-  much appreciated