Are Health Insurance Premium Rebates Taxable for Tax Year 2023?

[25312]

Client received a letter from Anthem Health Keepers stating that they would be rebating a portion of their health insurance premiums.  Also, they stated that this rebate is required by the Affordable Care Act.  The client received a check for $274.90.

[rbynaker]

That's a whole big pile of "it depends."

In general this is probably a refund of a prior year expense with no tax benefit.  If there were itemized deductions in the prior year which included medical expenses that resulted in a tax benefit, then this would be a taxable recovery (similar to a state tax refund).

If this was employer sponsored, those refunds go to the employer and it becomes their problem, so I'm assuming this was individual or marketplace insurance.  There may have been an impact on a prior year's PTC so that's something to consider.  The rules are not very clear.  I went down that rabbit hole one year and never found a way out. 🙂  In my case the premiums were 100% subsidized (so full PTC) so we just picked up the refund as taxable income.  I think in most other cases there will be something paid out of pocket so this becomes a refund of that expense.

Rick

[Strongsilence-CPA]

Mr. Naker - nice explanation.

The poster might consider pondering and thinking about the tax benefit rule.