Marketplace health ins premium rebate

[Mainecat]

Taxpayer has marketplace health ins and received a "Health Ins Premium Rebate" in 2021 of about $1,000.  I don't see that it is reflected in anyway on the 2021 Form 1095-A.  Does this need to be reconciled somewhere on the Form 8962 or added as "other income".  I haven't found any guidance

[jeffmcpa2010]

Does the taxpayer have any paperwork on the  "Health Ins Premium Rebate" that you can review?

[rbynaker]

My guess would be an MLR rebate.  I did some research a few years ago and didn't come up with anything conclusive.  If that's what it is, google "MLR rebate".  It's very situational.  If there was no tax benefit from the overpaid premium in the prior year then a partial refund of a non-deductible expense is not taxable income.  If there was a medical deduction or SEHI in the prior year then it may be a taxable recovery under the tax benefit rule.  I had a whopping $88 one year that I just picked up as other income.

Rick

[Mainecat]

Yes - the letter stated the 2021 rebate was for the 2020 tax year as the plan did not meet the "Medical Loss Ratio Standard".  Evidently if the ins co didn't  spend 80% on healthcare they were required to rebate 10.20% of the health ins premiums.

[BobKamman]

The premium tax credit is a fixed amount based on the taxpayer's income and the standard cost for a policy, right?  So if they paid more or less than that standard rate, it shouldn't make any difference.  

If they itemized and had enough medical expenses to claim, the rebate is like a state tax refund, and should be added back to income in the year received to the extent there was a tax benefit from it.  Except in backwards states like Arizona, where 100% of medical costs are deductible without a 7.5% limit, if you don't have to add back your state tax refund on the state return (yes, state income taxes are deductible, remember, it's Arizona) then you shouldn't have to add back your excess medical either.