Affordable Health Insurance: ARPA Expansions

The American Rescue Plan Act of 2021 (ARPA) has put into place several temporary expansions to the Affordable Care Act (ACA) provisions that can help Americans access health coverage at affordable prices. In general, these benefits apply to people who purchase health insurance in the Marketplace (created by the ACA) because they do not have an affordable option available through employment. The expansion has two dimensions: 1) more people are eligible for help paying the health insurance premiums for plans purchased in the Marketplace, AND 2) those who are eligible for help are now eligible for MORE help, so that their share of the monthly premium can be reduced.  People who are unemployed will especially benefit.

The Health Insurance Marketplace is now open for enrollment through August 15, so if this information makes you want to enroll in a plan OR change the plan you chose, you should be able to do so in the next few weeks. NOTE: The law took effect March 11. The agency in charge of the Health Insurance Marketplace expects to be ready to implement many of the changes on April 1. Suggestion: if you call or log in to the Marketplace in early April, ASK if the new rules are yet in place. It might be worth waiting a week or two in order to be sure the changes have been built into the system.

More Help. The ACA created a maximum cost people would have to pay for health insurance premiums, stated as a % of your income. The ARPA dramatically reduced that percentage of income for 2021 and 2022.  For example, suppose you are a 2-person household with income of $43,000/year (which is just under 250% of the poverty level); under the ACA your share of the premium for a benchmark silver plan would have been 8% of your income; under the new ARPA guidelines, your share of the premium cost for that same silver plan is just 4% of your income. Implications:

  • Some people who previously decided health insurance was too expensive will NOW decide it is affordable under the new rules.
  • People who chose a less-expensive bronze plan despite its higher deductible and copays may NOW decide a silver plan is worthwhile.
    This is of special value to those who are at or below 250% of the federal poverty mark, because these folks are eligible for plans that sell for a “silver” price but have smaller deductibles and copays so that they are more like a gold or platinum plan. In other words, folks under the 250% level can get a premiere plan for a budget price.
    It’s sort of like getting a brand-new luxury SUV for the price of a 2014 compact sedan!
  • If you are already enrolled in a Marketplace plan, there is a good chance that your share of the monthly premium is reduced under the new rules. Consider contacting the Marketplace (800-318-2596) sometime later in April.

More People Eligible.  Under the original ACA rules, if your income was over 4 times the poverty level, you were not eligible for help paying for health insurance. Under the ARPA expansion, people of any income level are eligible if the cost of the Marketplace plan would exceed 8.5% of their income. This will be especially valuable for those in their 50’s and 60’s, since health insurance premiums rise with age. This provision is also in effect for 2021 and 2022. 
Implication: some people with incomes above the 400% threshold may have compromised to save money by purchasing health coverage that was poorer quality (that is, it does not meet the ACA standards related to broad coverage and value). With the new cap of 8.5% of income regardless of income level, these folks might now be able to purchase a high-quality plan for an affordable price.

Huge Benefit for Those Unemployed at ANY time during 2021.  Note: this benefit is ONLY in effect in 2021.  If you receive(d) Unemployment Income at ANY time during the 2021 calendar year, special rules apply for your eligibility. With regard to eligibility for help paying for health insurance in the Marketplace, any income above 133% of the poverty level will be disregarded. That means these households will be eligible for the “platinum-like” silver plans for FREE – the premiums will be entirely covered by the subsidy.  Note: all other qualifications must also be met. For example, if you have workplace coverage available that is considered affordable, then you will not be eligible for the free silver plan.  However, if you are unemployed now, take advantage of the free silver plan. If you get a new job in a couple months that provides insurance, you can then drop the silver plan.
For those whose incomes are below 100-133% of poverty, they will be eligible for Medicaid coverage (also free), even in states where Medicaid was not expanded.

COBRA Subsidy. For people who lost health coverage due to being laid off or having their work hours reduced, the government will cover the cost of their COBRA premiums for up to six months, from April 1 – September 30, 2021. Check with your employer about how this might help you. Even if you lost your job months ago and did not sign up for COBRA at that time, you should now be able to sign up for COBRA.
Note: if you are in this group, you might also benefit from Marketplace insurance or Medicaid, so be sure to evaluate all your options.

Primary Source: Kaiser Health News Details for the % of income (paragraph 3) from Kitces.com
For more information see: https://www.healthcare.gov/more-savings/

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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$1400 Stimulus: The Same, Yet Different

People are excited about the extra $1400 stimulus payments that are coming. Last Saturday, just ONE day after the bill was signed, I heard by the grapevine that some folks already received their payment! More received it this past week, and more will be receiving it in the next several weeks. Even though Americans knew this was coming, and even though it is the third in a series of payments promoting economic recovery from the impact of the pandemic, it does involve some differences worth noting.

  • All dependents qualify. Under the earlier stimulus payments, households received extra payment only for dependents who were eligible for the Child Tax Credit (i.e. under age 17). However, the new round of payments will include dependents who are older children, parents or others. Caveat: it may not be safe to assume that this includes dependents who are not relatives or other atypical dependents – we will need to watch how the law is applied.
    This is the BIGGEST change, and will affect MANY families!
  • The payments are protected from being held back to pay federal debts, such as back student loans, back taxes or back child support. However, as of now, these funds are not protected against private debt collectors after they arrive in your bank account; they could be seized (garnished) for repayment of credit card debt or other private debt.
  • The payments are available to people below certain income limits, just as before, but this time the phaseout is steeper. The phaseouts are as follows: Single Filers and Married Filing Separate phase out from $75,000 – $80,000; Head of Household phases out from $112,500 – $120,000; Married Filing Joint, from $150,000 – $160,000.
  • The steep phaseout means that for some households, the difference in income from one year to the next may be important. The income guidelines may be applied to your income for either of two or three tax years, and if you meet the rule for any of the years, then you will be eligible. For starters, they will check your most recently-filed return, which may be either 2019 or 2020. If you were below the threshold for 2019 but above it for 2020, it may be worthwhile to delay filing your 2020 return until you receive your payment. If your 2020 income is within the limits, then your 2020 return will be used, as long as it is filled within 90 days of the tax-filing deadline of May 17, 2020. And if you didn’t qualify based on 2020, you can still receive the payment as part of your 2021 tax return.
    One key implication: if your income in a normal year would put you above the limits, but you had lower income in 2020, then get your 2020 tax return filed before that deadline of 90 days after May 17!
  • If the payment is made based on your 2019 or 2020 income, and then your 2021 income proves to be above the limit, you will not need to pay anything back.

Source: Kitces.com

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Unemployment Compensation Exclusion – Stay tuned!

When the American Rescue Plan was passed recently, consumers paid most attention to the $1400 stimulus checks (which we’ll discuss in an upcoming post), but there’s another feature that has gotten less attention. If you received unemployment compensation in 2020, it’s good news for you!

The first $10,200 of unemployment income you received in 2020 will now be excluded from your taxable income. This exclusion applies in 2020 only. Exception: you are not eligible for the exclusion if you are a high-income household (over $150,000). In states that follow most provisions of federal tax law, including Iowa, the exclusion also applies to state income tax.

This Unemployment Compensation Exclusion will make a big difference on tax returns for people who qualify, reducing tax bills (and/or increasing refunds) by $1,000 or more for some households. Note: the amount depends on how much unemployment compensation you received and on your total taxable income.

The software we use at Volunteer Income Tax Assistance (VITA) sites was updated very quickly; the update was in place by Friday March 19, only a week after the law was signed. I’m sure the same is true for most other tax software packages.

Some of you may be wondering: what if I filed my tax return earlier in the season??

Do not fear – you are also eligible for the exclusion. However, we do not yet know how that is going to be handled; we need to wait for word from the IRS. For now, the IRS says: “WAIT – don’t take any action until we’ve announced how you should handle it.” The worst-case scenario is simply that you would need to file an amended tax return.  However, some of us are hoping that the IRS and their computers will be able to simply pull out those tax returns, recalculate them, and issue the additional refunds. If that would happen, taxpayers would see two results: 1) an additional refund (check or direct deposit); and 2) a letter explaining the adjustment. Don’t be surprised if the refund arrives before the letter. The same issue arises for state tax returns, and the possibilities are basically the same as well: they may be able to recalculate and issue additional refunds with no action from you, OR you may have to file an amended return. Reminder: for now, the IRS does NOT want anyone to file amended returns for this purpose.

If you are eligible for the Unemployment Compensation Exclusion but filed your taxes before it was enacted, you will need to stay tuned for more information and you may need patience. As always, never ignore a letter from the IRS, and pay attention to your bank statements.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Another Fraud-fighting Tool

I recently learned about the USPS service called Informed Delivery. If you choose to sign up, you will then receive notifications when mail and packages arrive, but they’re not just blank notifications; you actually get a picture of the letter(s). That means I can see who my letter is from. Note: it does not provide an image of items that are not “letter-sized,” such as magazines or advertising. Depending on the security of your personal mailbox, this could be a great reassurance that no one has taken any of your mail. OR if an important piece of mail is scheduled to be delivered, it may allow you to plan ahead and make sure someone is there to pick up the item immediately.  

Informed Delivery also confirms package delivery, so it could protect you against “porch pirates” who might steal your packages. It also allows you to leave specific delivery instructions if you won’t be home to receive a package on a certain day.

Preventing mail theft is valuable — if certain pieces of mail end up in the wrong hands, they could leave you susceptible to identity theft and other types of fraud. I see it as a nice convenience too. I’m thinking about my adult children, both of whom live in housing complexes where they have to walk outside to get to their mailboxes. This service would let them know whether it’s worth going after the mail on any given day! 

The notifications arrive by email; additionally an app is available for either I-phones or Android devices. Learn more!
A big thanks to my friend Janel, who has family connections in the postal service, for sharing this tip!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Reduced Income in 2020? Check on the EITC

Today is EITC Awareness Day — a great day to remind people about the benefits of the Earned Income Tax Credit. This credit is an “add-on” to your tax refund if you qualify — it is designed to provide a financial boost to working people with low and moderate incomes. This one-minute video gives a great overview!

Even if you’ve never been eligible for the EITC in the past, there’s a chance you might be eligible for it in 2020 if your income was lower, and within the income guidelines. Two figures affect the amount you receive: your total income (Adjusted Gross Income) AND your earned income — income that was payment for work. The maximum income guidelines depend on family size; the highest limit ($56,844) applies to married-filing-jointly households with three or more children. Other eligibility rules apply as well; check out the details and/or use the IRS screening tool.

P.S. Maybe you never guessed the IRS had a YouTube channel! Their videos do a great job explaining lots of tax topics!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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File Your Taxes for Free

Due to COVID, many VITA or AARP volunteer income tax sites are either closed this year or operating at limited capacity, in order to protect the health of all involved. If you have relied on free tax assistance in the past, what can you do now?

IRS Free File is one great answer. It’s an agreement the IRS has made with a number of tax software companies, so that people with incomes below $72,000 can use the software packages to file their federal return (and sometimes their state return) for free. There is no need to be intimidated by the idea of filing your own tax return — these software packages are designed to be very consumer-friendly. If you paid attention last year when your tax preparer reviewed your return with you, and if your situation this year is similar to last year, you are a perfect candidate to do it yourself!

When preparing your own tax return, be sure to:

  • Use a secure internet connection (don’t use public wi-fi at a coffee shop)
  • Read and answer the questions carefully
  • Take your time and double-check the information you enter
  • Remember that you can start one day and not finish – you can come back later when you’ve gathered more information.
  • Save the pdf of your return so you have a copy for next year.

If your tax situation has changed significantly since last year and you are not comfortable preparing your own return, there still are volunteer income tax sites available.  The IRS has a VITA site locator tool to help you find a site near you. NOTE: The site locator tool is not yet active — the IRS plans to have it operational by February 1. Likewise, the AARP Foundation Tax-Aide Locator is expected to come on-line in early February.

If you are eager to get moving now, remember that the IRS will not even begin accepting 2020 tax returns until February 12, due to late December changes in the tax law. We’ll all need to be patient for our tax refunds this year!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Tax Law worth knowing: EITC “Look Back”

If a mention of tax law causes your eyes to roll back in your head, I ask you to snap out of it for a minute, because this one is important to ordinary households. It’s new (and temporary) — part of the new COVID relief bill enacted this past week, and it will be huge for many workers who have been unemployed or had reduced earnings in 2020.

The Earned Income Credit is a powerful tool for helping working families with lower wages. The amount you receive depends on your earned income. Higher earnings (up to a point) means higher EITC.

2019 EITC Chart: Married Couple with 2 children

Here’s a 2019 example: A married couple with 2 children and with earned income between $14,550 and $22,400, was eligible for an earned income tax credit of $5,828 in 2019. That’s an extra $5,828 added to their tax refund. If their income was below $14,550 then their EITC was lower, but even if they only earned a small amount from work, they would receive some EITC. If their income was higher than $22,400 the amount of EITC gradually dropped, but they would still receive some EITC even if their income was as high as $52,400.

Suppose: a married couple with 2 children earned $25,000 in 2019, and received an EITC of $5,785. However, in March of 2020 they were laid off. They did receive unemployment, but that is not earned income. Their actual earnings from work in 2020 was only $5,000, which made them eligible for EITC of $2,010. That’s a loss of over $3,700, in a year when they were already struggling. The “look-back” provision in the new relief bill allows them to receive EITC (and also the Child Tax Credit) based on their 2019 earned income if it would be more beneficial.

By contrast, imagine a married couple with two children who had earned income of $60,000 in 2019. Their income was too high for EITC in 2019. However due to furloughs, their earned income in 2020 was only $40,000. They will be eligible for EITC in 2020 based on their 2020 earnings (assuming they meet other eligibility rules). When calculating EITC and CTC, taxpayers can choose to use either 2019 or 2020 income figures, depending which is better for them.

Tax law worth knowing!

Source: Kitces.com

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Money Guidance via Podcast

graduates

Targeting those in college or planning for college, the U.S. Consumer Financial Protection Bureau recently launched a podcast called Financial inTuition. The six episodes currently available are divided into two categories: three episodes focused on student loans, and three on basic money management skills with a focus on issues faced by students.

Each episode includes an interview with either an expert or a consumer with first-hand experience. It’s always helpful to learn from other people’s experience!

The podcast is available free wherever you get your podcasts, OR directly from the CFPB website. It is part of a broader set of resources targeting students and young adults on topics like paying for college (including information about student loans and the GI Bill), and money management information for economically-vulnerable consumers (which includes most young adults just starting out) on topics like building credit access and finding money to save. They also provide materials for both youth educators and adult educators.

Check out these resources for yourself OR share them with someone you care about!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Beware: Vaccine Scams

Like anything else that is new, the COVID vaccine is likely to be followed quickly by vaccine-related scams as well as misinformation. Likely scams to watch for:

  • Opportunities to “move higher on the list” by paying a fee. Truth: the vaccine roll-out is being carefully monitored, and there will be no way to get the vaccine quicker.
  • Any contact or news suggesting you pay a fee to receive the vaccine. Truth: due to the need to get as many people vaccinated as possible, you are likely to have no out-of-pocket cost when getting the vaccine.
  • Any contact asking for your social security number, bank account information or credit card number in order to schedule a vaccination. Truth: it is NEVER wise to give out personal or financial information when you did not initiate the contact.
  • Alternative “cures,” treatments,” or “preventives” for sale while you wait your turn for the vaccine. Truth: it is never wise to accept health advice or purchase health products from anyone other than a reputable health provider. Contact your own provider before purchasing any product or service.

Along with the potential for scams, the arrival of a vaccine creates opportunity for misinformation. Rely on trustworthy sources. For health information related to COVID-19, consult www.coronavirus.gov or www.coronavirus.iowa.gov. Both of these sites draw information directly from the Centers for Disease Control (CDC) and other reputable sources.

Source: Federal Trade Commission

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Did you give? Take the deduction!

I love the fact that “Giving Tuesday” has become an annual tradition in the U.S. If you have made gifts to charities anytime during 2020, you may be able to take a tax deduction even if you do not normally itemize deductions!

The CARES Act allows people to deduct up to $300 of charitable giving on their federal tax return without using Schedule A, which is the “itemized deduction” form. That’s great news, because even the lowest standard deduction (federal) is more than $12,000; that means that it’s not worth itemizing deductions if your total deductions would be less than that. Due to the special rule for 2020, taxpayers who gave to charity will be able to deduct their charitable gifts up to $300 while ALSO claiming the appropriate standard deduction. Note: the special CARES Act rule applies only to donations of money; donations of goods, such as clothing or household goods donated to Goodwill or Salvation Army, can only be deducted if you itemize.

What to do? if you made monetary gifts to qualified charitable organizations, gather up your receipts and keep them for tax time. Can’t find the receipt? Cash gifts with no receipt cannot be deducted, since there is no evidence of the gift. But gifts made by check can be deducted even without a receipt, as long as they were bona fide gifts and not payment for something. Here are some examples to explain some common mistakes:

  • Suppose you and your spouse ate at a spaghetti dinner that was sponsored by a local non-profit for free will donation, and you put $20 in the basket. That $20 is NOT a charitable contribution because you received a meal in exchange for the money you gave.
  • Gifts to political or commercial organizations are not tax deductible. The charity should tell you if your gift is tax-deductible, but if in doubt, check the IRS database.
  • If you include $30 in a sympathy card after a person’s death, intending it for the charity of the family’s choice, that is NOT tax-deductible, because you don’t know if it was used for charity. However, if you make out a check to a charity in honor of the deceased individual, that is a deductible contribution.

The Internal Revenue Service is the authoritative source for information on charitable contributions and all income tax topics. Click here for information on this special deduction for 2020.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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