A look at tax credits offered for Affordable Care Act

KALAMAZOO, Mich. (NEWSCHANNEL 3) - A major component of the Affordable Care Act kicked in on October 1, but two weeks later, there are still a lot of questions about what is considered affordable.

Newschannel 3 talked to a couple experts to get some answers.

As of January 1, everyone will have to have health insurance, or possibly pay a tax penalty.

But early in the process, many people are finding that health insurance is still not very affordable.

"We have been getting a lot of questions about how much are these plans really going to cost, if it's the prices people have been hearing," said Michelle Fitzgerald, with Cherry Street Health Services.

Fitzgerald is helping people through the process every day.

She says what the government considers "affordable," is based on a percentage of your income.

"What the marketplace considers affordable is 8 percent of your income," Fitzgerald said.

Let's say there's someone making $23,000 per year. They may find an insurance policy that costs 5-thousand dollars.

Of course, that's far more than 8 percent of their income. So the government is offering tax credits to bring the cost down.

"So, at 23,000, that's approximately 200 percent of the poverty line, the credit would end up equaling about $3,550 on a 5,000 dollar plan," explained Deb Pellerito, a CPA with Jansen, Valk, Thompson Reahm.

Tax credits are calculated on a sliding scale. People making up to 400 percent of the federal poverty line may qualify.

And you don't have to wait until tax time to get the money.

In most cases, that credit can come right off your monthly premium.

"The IRS will base their credit on where they fall in the poverty line and they will actually, on a monthly basis, pay 1/12 of that credit to the insurance company to offset the cost, so the individual is only required to pay their share of the monthly cost," Pellerito said.

"There are some tools that we have, including a premium estimator, and obviously that's not official, but some of the people I've used that with have been shocked at how much they qualify for," Fitzgerald said.

There are estimators online to help you get an idea of what kind of tax credits are available to you.

You'll find one that's easy to use, via the Kaiser Family Foundation. It can be found by clicking here.

Tools like the calculator with the Kaiser Family Foundation are just estimators, though. You'll have to go through the application process to get the exact amount.