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Forbes
6 days ago
- Business
- Forbes
ACA Premiums Are Set To Spike For Some In 2026—How To Lock In Savings Now
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Millions of Americans could lose a tax credit that saves them thousands of dollars on ACA Marketplace health insurance by the end of the year. The tax credit, initially expanded under the American Rescue Plan during the pandemic and later extended through 2025 by the Inflation Reduction Act, saw expanded eligibility beyond the income cap of 400% of the federal poverty level starting in 2021. These subsidies capped out-of-pocket premiums to no more than 8.5% of income for those who qualified. Unless Congress acts, the expanded eligibility will expire at the end of the year, creating what experts are calling a 'subsidy cliff' for enrollees with incomes above the 400% income threshold. The 2024 Open Enrollment report from the Centers for Medicare and Medicaid Services found enrollees at 400% of the federal poverty level saved an annual average of $4,248 on their health premiums. Losing eligibility for this tax credit could leave many Americans facing unaffordable health insurance costs. The Centers for Medicare and Medicaid Services reports the subsidy expansion of the tax credit led to increased enrollment in the ACA Marketplace, particularly in low-income communities and states that hadn't previously embraced the program. According to Kaiser Family Foundation, since 2020, enrollment in the ACA Marketplace has more than doubled, with 88% of the total growth—11.4 million out of 12.9 million new enrollees—in enrollment came from states won by Trump in 2024. States like Texas, Mississippi, West Virginia and Georgia saw their enrollment numbers more than triple. A household of two earning up to $84,600 (400% of the poverty level) currently qualifies for the tax credit. But if their income increases in 2026, they'll lose their eligibility that saves them $500 on monthly health insurance premiums—or $6,000 annually. 'It's one of the more lucrative credits that are out there for individual taxpayers,' says Tommy Lucas, a certified financial planner at Moisand Fitzgerald Tamayo. Talks to extend the enhanced tax credit have stalled in Congress, with House Republicans 'balking' at the thought, according to a Politico report . That means households already teetering past 400% of the federal poverty line—or those that know they'll exceed it next year—need to start making a financial plan now to stay within the income threshold limits. The battle, financial experts say, begins at the tax office. A few potential tax planning steps to take include: Tax loss harvesting : This investment method means investors sell investments that have lost value to help cancel out the taxes on their gains. Look at your portfolio to identify investments that are down and see if selling them could lower your tax bill. This investment method means investors sell investments that have lost value to help cancel out the taxes on their gains. Look at your portfolio to identify investments that are down and see if selling them could lower your tax bill. Leverage health savings accounts : You can claim tax deductions through contributions made to a health-savings account (HSA). With the new tax law that passed under the One Big Beautiful Bill Act, all Bronze and catastrophic plans under the ACA are considered HSA-eligible, starting in 2026. 'For single-filers, you can contribute $4,300, for families, the maximum is $8,550. There's a $1,000 catch-up contribution for those 55 and older, so you can effectively reduce and back away from the cliff by that amount,' says Lucas. You can claim tax deductions through contributions made to a health-savings account (HSA). With the new tax law that passed under the One Big Beautiful Bill Act, all Bronze and catastrophic plans under the ACA are considered HSA-eligible, starting in 2026. 'For single-filers, you can contribute $4,300, for families, the maximum is $8,550. There's a $1,000 catch-up contribution for those 55 and older, so you can effectively reduce and back away from the cliff by that amount,' says Lucas. Max out retirement contributions in tax-deductible accounts: One of the most effective ways to lower your taxable income is to contribute to a 401(k) or IRA, which offer upfront tax breaks. In 2025, individuals can contribute up to $23,500 to a 401(k) (plus an extra $7,500 if you're 50 or older), and up to $7,000 to a traditional IRA ($8,000 with the catch-up). 'This deferral of earnings will lower your taxable income exposure,' said Bill Shafransky, a senior wealth advisor at Moneco Advisors and a member of the Financial Planning Association. Lucas recommended turning to tax experts and services that can help enrollees navigate the 'complicated' process to keep their income within means. While individuals can and should file using free or low-cost tax software , a little expertise could go a long way. 'This is going to potentially be thousands of dollars in cost, so always talk to a professional who knows the ins and outs of this,' says Lucas. 'Open enrollment is coming up pretty soon in November, so start planning now.'
Business Insider
7 days ago
- Business
- Business Insider
Millions of Americans could pay up to $1,247 more for Affordable Care Act health insurance next year
Middle-class Americans have a new cost to worry about next year: Pricier health insurance premiums. A Biden-era policy expanding eligibility for Affordable Care Act subsidies is set to expire at the end of this year, and there doesn't seem to be much legislative appetite to extend it. Without those subsidies, out-of-pocket premium costs are set to go up by an average of 75% — imposing another financial burden on Americans and potentially leading to some opting out of coverage altogether. For some Americans, that could mean a $1,000 or more a year increase in health insurance. An analysis from the Center on Budget and Policy Priorities found that the enhanced ACA subsidies reduced net premium costs by 44% in 2024, with 93% of those enrolled in the marketplace receiving some form of premium tax credits. In 2024, around 19.3 million Americans enrolled in the marketplace received premium tax credits — the subsidy beefed up by both the American Rescue Plan and the Inflation Reduction Act. How much enrollees received depended on their income and the initial costs of their local plans. Miranda Yaver, an assistant professor of health policy and management at the University of Pittsburgh and a healthcare fellow at the left-leaning Roosevelt Institute, said that the enhanced subsidies were a "game changer" for Americans who earn too much to qualify for Medicaid, but still may struggle to make ends meet. Business Insider has reported on these workers, known as ALICE or asset-limited, income-constrained, employed. They make too much to qualify for robust assistance, but still struggle to pay their bills. "If you're piecing together some better-than-minimum-wage jobs, but still hourly jobs, this means that health insurance becomes much more accessible, and that means that you can get the care you need and not have to fear as much about getting sick," Yaver said. Subsidies expanded who was eligible for ACA health insurance Some GOP legislators have argued that the policy expanded ACA eligibility too much and offered relief to higher earners while remaining costly to the country. A CBO projection found that making the policy permanent would increase the deficit by $335 billion over the next decade and reduce revenues by $60 billion. "It is particularly concerning that, by removing the income eligibility limit, some of our nation's highest earners are now eligible for government assistance," Reps. Jason Smith and Jodey Arrington, who respectively chair the House Ways and Means Committee and House Budget Committee, wrote in a 2024 letter. "In certain areas of the country, a family making as much as $599,000 in 2023 could qualify for taxpayer-funded subsidies." Before the subsidies, only Americans earning between 100% and 400% of the federal poverty line qualified, or between $15,650 and $62,600 based on the current cutoff for a single American. That 400% limit was expanded under the new structure, meaning that some Americans with ACA coverage were newly eligible to have some premium relief, especially older beneficiaries. Those who made above the 400% line, but were spending over 8.5% of their household income on premiums, became eligible for subsidies. Christen Young, a visiting fellow at the Brookings Institution's Center on Health Policy, said that those newly eligible Americans saw savings of around $10,000 to $15,000 a year on their premiums. "Those are the people who are facing particularly large increases in premiums when these enhancements expire," Young said. A 2024 KFF analysis found, for instance, that Americans making $40,000, or 266% of the federal poverty line, could see their annual premiums increase by $1,247 annually. "If you take a single parent of one child earning $50,000 a year, that family is saving about $1,700 because of the enhanced premiums. They're going to see their premium increase by about 80% next year when the subsidy enhancements go away," Young said. "A family of four with a household income of $130,000, they're saving $8,000 a year with these enhancements, and they'll see their yearly premium increase by about 60 to 70% next year." When health insurance costs go up, healthy young people tend to drop coverage With the expiration looming at the end of the year and premiums expected to rise, many younger and healthier Americans may decide to opt out of coverage. This could, in turn, raise costs even more for those who remain on ACA plans. Without that younger and healthier group, it becomes more expensive to insure the remaining Americans, and costs go up across the board. "It's insurance companies correcting for the fact that the people who are going to be enrolled in their plans will probably not be as healthy," Yaver said. A projection from the nonpartisan Congressional Budget Office found that should the measures lapse, 4.2 million more Americans would be uninsured by 2034. "One of the things that is really critical to health insurance is being able to essentially spread the risk of insuring people so that we can essentially bring younger and healthier people into the insured population," Yaver said. There is a possibility that Congress could step in and extend the subsidies, although that looks unlikely, as it would have to have bipartisan approval. The potential end of the subsidies also comes as Americans face a mixed economy: The labor market is seeing shifts, but still chugging along. Inflation is creeping higher, and consumer sentiment is looking dreary — albeit not as low as it has been. "The average American would have a very difficult time accommodating an unexpected $1,000 expense. That could be a medical, dental expense, home repair, car repair, you name it," Yaver said. "It's very easy to end up spending a thousand dollars in the American healthcare system."
CNBC
22-07-2025
- Business
- CNBC
ACA marketplace health plan enrollees could face 'subsidy cliff' in 2026 — here's how to avoid it
Starting in 2026, millions of Americans could see a steep increase in the cost of marketplace health insurance — unless Congress extends a pandemic-era boost that made Affordable Care Act plan premiums more affordable. This could affect millions of Americans, including students, self-employed or contract workers and younger retirees, who buy marketplace insurance and claim the so-called premium tax credit, which makes coverage cheaper. The enhanced benefit is set to expire at the end of the year. If it does, some enrollees could face a "subsidy cliff," which eliminates the premium tax credit entirely, once income exceeds certain thresholds, financial experts say. More from Personal Finance:Trump's 'big beautiful bill' includes these key tax changes for 2025Student loan bills to double for some borrowers as Biden-era relief expiresWhat a Trump, Powell faceoff means for your money If you pass the threshold by even $1 and lose the credit, "costs could go up by hundreds of dollars a month," said certified financial planner Cathy Curtis, CEO of Curtis Financial Planning in Oakland, California. But precise income projections can be tricky, said Curtis, who is also a member of CNBC's Financial Advisor Council. The average ACA enrollee saved roughly $700, about 44%, from the enhanced premium tax credit in 2024, according to November research from the Center on Budget and Policy Priorities, a nonpartisan policy organization. Enacted in early July, President Donald Trump's "big beautiful bill" made permanent the Republicans' 2017 tax cuts. But it did not extend the enhanced ACA subsidies passed via the American Rescue Plan in 2021. It's unclear whether the GOP-controlled Congress will consider such a measure before year-end. Here is a breakdown of what to know about the premium tax credit and how to avoid the "subsidy cliff" if enhancements expire after 2025. If you're eligible for the premium tax credit, you can use it to reduce monthly ACA premiums upfront or claim the credit on your tax return. The tax break was originally for enrollees earning between 100% and 400% of the federal poverty level. But the American Rescue Plan expanded eligibility above 400%. For 2025, that threshold was $103,280 for a family of three, according to The Peterson Center on Healthcare and KFF, which are both health-care policy organizations. For 2025, more than 22 million people — about 92% of enrollees — receive premium tax credits, according to KFF. That group could be "significantly affected in 2026" if Congress doesn't extend the larger benefit, said Tommy Lucas, a CFP at Moisand Fitzgerald Tamayo in Orlando, Florida. It's important to run tax projections for 2025 and 2026 if premium tax credit changes may affect you, experts said. If you're receiving the tax break for 2025 with earnings over 400% of the federal poverty level, you could explore ways to reduce 2026 income, Lucas said. For example, you may consider accelerating 2026 income into 2025, tax-loss harvesting or claiming a deduction for health savings account contributions, he said. If the bigger premium tax credit expires for 2026, "we're going to have to monitor [income] on a pretty regular basis, at least quarterly, if not monthly" to avoid the cliff, Lucas said.
Forbes
21-07-2025
- Business
- Forbes
Everything Parents Need To Know About The 2025 Child Tax Credit Changes
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. The Child Tax Credit is getting another update in 2025 under the new One Big Beautiful Bill . While it doesn't match the expanded benefits from the 2021 pandemic relief, the credit continues to provide significant support, particularly for middle-income families facing rising costs. The 2021 American Rescue Plan temporarily increased the Child Tax Credit to $3,600 per child under age 6 and $3,000 per child aged 6 to 17. It also made the credit fully refundable, allowing families who didn't owe any federal income tax to receive the full amount. Under the new policy, the credit reduces to $2,200 per child under 17—close to what it was prepandemic. While there's no extra boost like before, it's still a nice tax break. The good news? More families can now qualify for the tax credit thanks to higher income phaseout thresholds. The credit now begins to phase out at: $200,000 for single filers $400,000 for married couples filing jointly Before 2021, phaseouts kicked in at much lower levels—$75,000 and $150,000, respectively. This is a welcome change for middle-income families, especially those in high-cost areas, who may have previously phased out under the old limits. Claiming the Child Tax Credit is pretty straightforward; however, you want to make sure you include the correct forms so you don't miss out. Use IRS Form 1040 to file your federal taxes to file your federal taxes Attach Schedule 8812 , the form for the Child Tax Credit, to claim the credit , the form for the Child Tax Credit, to claim the credit File by the tax deadline, which is April 15, 2026 Before filing, make sure you meet the new requirements from the IRS, as missing or inconsistent information could hold up your credit. Here's what the IRS now looks for from the qualifying child: Age. The child must be under 17 at the end of the tax year. The child must be under 17 at the end of the tax year. Relationship. The child must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or even a grandchild, niece or nephew. The child must be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or even a grandchild, niece or nephew. Support. You need to be primarily supporting them; the child can't provide more than half of their support during the year. You need to be primarily supporting them; the child can't provide more than half of their support during the year. Residency. To qualify, the child must have lived with you for more than half the year. To qualify, the child must have lived with you for more than half the year. Dependency. You need to claim them as a dependent on your tax return. You need to claim them as a dependent on your tax return. Filing status. The child cannot file a joint tax return with someone else unless they are seeking a refund of withheld or estimated taxes. The child cannot file a joint tax return with someone else unless they are seeking a refund of withheld or estimated taxes. Citizenship. The child must be a U.S. citizen, U.S. national, or U.S. resident alien. The child must be a U.S. citizen, U.S. national, or U.S. resident alien. Social Security number. The child needs a valid Social Security number to work, and it must be issued before your tax return is due (including any extensions). If you have unpaid federal taxes, the IRS can reduce your Child Tax Credit to cover what you owe. So, if you're behind on payments, you'll want to clear those debts before filing to avoid losing part of your credit. Even if your tax bill is low or zero, you could still receive the Child Tax Credit. Because part of the credit is refundable, families may receive up to $1,700 per child, providing crucial support regardless of tax liability. Start by gathering your paperwork. Make sure you have your child's Social Security number and any custody or relationship documents. In addition, check whether your annual income falls under the phaseout limits, so you have a better idea of what to expect. If you owe back taxes, it's best to deal with it now than put it off. If you don't owe anything, you can begin organizing your documents and preparing for tax season. And if all this feels overwhelming, getting help from a tax professional or using reliable tax software can make the process easier. Here are some of the best tax software options available. The 2025 Child Tax Credit isn't as big as the pandemic-era boost families got in 2021, but it is still a relief for many, especially middle-income households. With higher income limits, more families can get the full credit this year. That said, the IRS is enforcing stricter eligibility rules. Make sure your paperwork is in order and address any unpaid taxes that could hold up your claim.
Indianapolis Star
21-07-2025
- Business
- Indianapolis Star
Tariffs will cost families $2,500 this year — but wages won't rise to help
The average American family will pay about $2,500 more this year because of tariffs. But unlike inflation, your wages won't rise to compensate. That's because tariffs work differently than inflation. Tariffs cause an increase in the price of goods, both imported and their domestic competitors. But that price increase is not technically inflation — it's worse. Here is what is actually happening. Inflation is a decline in the value of currency over time. It happens because there is too much currency in circulation. That extra money can enter the economy through a growing deficit, as happened after the 2020 CARES Act, the 2021 American Rescue Plan and — the most inflationary of these — President Trump's Big Beautiful Bill. Still, tax and spending policy alone cannot cause inflation. The Federal Reserve must also allow too much money growth. Inflation affects all goods and services, including wages. So, during this unpleasant bout of inflation, wages actually grew more than prices — at least for the average private sector worker. Tariffs work very differently. Tariffs are taxes on imports and range from 10% to 55%, depending on the country of origin, the product in question and the president's hormone level. Following the 2018 tariffs, we learned from multiple studies that American consumers paid almost all the tariffs. This was to be expected, because we're a rich country buying goods from poorer nations. We are likely to be less price sensitive than manufacturing firms in developing countries. Hence, we pay more of — or nearly all of — the tariffs. The good news is that in February, March and April, American imports spiked. In those three months alone, we bought roughly five extra months' worth of goods. Those purchases were clearly intended to beat the tariff deadlines and avoid the extra tax. That surge of imports meant that many of the goods now on store shelves and being assembled into cars, computers and washing machines were bought before the tariffs. That pre-tariff stockpile has meant that price increases have been relatively low so far. The bad news is that only $335 of that $2,500 family tariff bill has hit so far. The rest is coming as importing firms pass along their costs. The consumer price index — the main measure of inflation — rose 0.3% in the latest reading. That's modest, but it came as the Federal Reserve was successfully reducing inflation. Prices have stopped falling and are rising again. These higher prices are solely due to Trump tariffs. They are poised to worsen substantially as the stockpile of pre-tariff goods are sold by retailers or put onto cars, RVs and other American-made products. The cost of goods sold later this summer, and until tariffs are eliminated, will continue to rise. This increase in prices and the consumer price index will look, feel and taste just like inflation. Journalists and even economists will call it inflation, but it's not inflation. If it was inflation, we'd eventually see wages rising as well. But higher tariff costs don't lead to higher wages; in fact, the opposite may occur. The tariffs took the U.S. from 2.4% growth in the fourth quarter of 2024 to -0.5% in the first quarter this year. The economy continues contracting, which will reduce wage growth and maybe even reverse it. So, as prices go up, wages will decline for the average worker. We import goods to make American workers more productive. Skilled American workers focus on high-value manufacturing while importing cheaper components from abroad. When tariffs force companies to pay more for imports or make low-value parts themselves, productivity falls. That means lower wages and profits — or more job automation. In the two months of data since Trump's Liberation Day tariffs were announced, the U.S. has lost 14,000 factory jobs. The slowdown in the economy this year follows a pattern that is nearly a precise example of what economic explanations of tariffs have predicted for a half century. The price increases due to tariffs are not technically inflation. Economists have a name for rising prices during a weak economy: stagflation. It's what made the 1970s so miserable.
