How Does The Health Care Tax Credit Affect My Tax Return? (TOP 5 Tips)

Claiming a net PTC will increase your refund or lower the amount of tax you owe. Net PTC is reported on Form 1040, Schedule 3, Line 8. Taxpayers claiming a net PTC must file Form 8962 and report an amount on Line 26 of the form when filing their 2020 tax return.

How do healthcare tax credits affect my refund?

Claiming and Reconciling the Credit You claim the premium tax credit and reconcile the credit with the amount of your advance credit payments for the year on Form 8962. Filing your return without reconciling your advance payments will delay your refund and may affect future advance credit payments.

Do you have to pay back the tax credit for health insurance?

If at the end of the year you’ve taken more premium tax credit in advance than you’re due based on your final income, you’ll have to pay back the excess when you file your federal tax return.

Does the premium tax credit have to be paid back?

Normally, people who under-estimate annual income – and receive too much advanced premium tax credit (or APTC) during the year – are required to repay some or all of the excess when they file their federal tax return for that year. However, the requirement to repay excess APTC resumed for the 2021 tax year and beyond.

How can I avoid paying back my premium tax credit?

The easiest way to avoid having to repay a credit is to update the marketplace when you have any life changes. Life changes influence your estimated household income, your family size, and your credit amount. So, the sooner you can update the marketplace, the better. This ensures you receive the correct amount.

What is the maximum income to qualify for healthcare tax credit?

What are the income limits for the premium tax credit in 2022? The Premium Tax Credit income qualification range is between $12,880 and $51,520 for individuals. For a family of four, income can be between $26,500 and $106,000.

Do I have to pay back the premium tax credit in 2022?

If your income for 2022 turns out to be greater than the amount you estimated when you sign up, you may have to repay some or all of the excess credit. But, when you file your 2022 return, your actual income turns out to be 410% FPL and you would only be eligible for a $3,100 tax credit based on that income.

Do I have to pay back my premium tax credit in 2021?

For the 2021 tax year, you must repay the difference between the amount of premium tax credit you received and the amount you were eligible for. There are also dollar caps on the amount of repayment if your income is below 4 times the poverty level.

Why do I owe taxes for health insurance?

You may owe the fee for any month you, your spouse, or your tax dependents didn’t have qualifying health coverage. You pay the fee when you file your federal tax return for the year you didn’t have coverage. In some cases, you may qualify for a health coverage exemption from the insurance requirement for that year.

How does marketplace insurance affect my taxes?

A tax credit you can use to lower your monthly insurance payment (called your “premium”) when you enroll in a plan through the Health Insurance Marketplace®. Your tax credit is based on the income estimate and household information you put on your Marketplace application.

What are the income limits for premium tax credit 2020?

Premium tax credits are available to individuals and families with incomes between 100 percent of the federal poverty line ($23,550 for a family of four) and 400 percent of the federal poverty line ($94,200 for a family of four) who purchase coverage in the health insurance marketplace in their state.

Why did I lose my premium tax credit?

When your income changes, so does your premium tax credit If your income changes, or if you add or lose members of your household, your premium tax credit will probably change too. If your income goes up or you lose a member of your household: You’ll probably qualify for a lower premium tax credit.

Questions and Answers on the Premium Tax Credit

When you purchase health insurance through the Health Insurance Marketplace (also known as the Exchange), you will be eligible for a refundable tax credit. This credit is meant to help qualified people and families with low or moderate income afford health insurance. According to a sliding scale, the amount of your premium tax credit will vary depending on your household income. Higher credits are available to those with lesser incomes to assist them in covering the cost of their insurance. During the enrollment process for Marketplace insurance, you have the option of having the Marketplace compute an anticipated credit that will be provided to your insurance provider in order to minimize the amount of money you pay each month for your premiums (advance payments of the premium tax credit, or APTC).

It is your responsibility to reconcile the amount paid in advance of the premium tax credit with the actual credit you compute when you submit your tax return if you have elected to have advance payments of the premium tax credit made on your behalf.

It is important to note that, for tax year 2020 only, you are not needed to attach Form 8962 to your 2020 tax return unless your PTC is greater than the APTC paid on your behalf for 2020 and you are claiming a net PTC deduction.

The credit is referred to as “refundable” because, if the amount of the credit exceeds the amount of your tax bill, you will get a refund for the difference in the amount of the credit.

However, if you made advance credit payments to your insurance provider and your actual permitted credit on your return is less than your advance credit payments, the difference will be deducted from your refund or added to your amount owing, depending on how much you paid in advance.

The Premium Tax Credit – The Basics

Individuals and families with low or moderate incomes who acquire health insurance via the Health Insurance Marketplace, also known as the Exchange, may be eligible for a refundable tax credit to help them pay health insurance premiums. There is a sliding scale that determines the amount of your premium tax credit you will receive. Higher credits are available to those with lesser incomes to assist them in covering the cost of their insurance premiums. The Marketplace can compute an anticipated credit that will be provided to your insurance provider to lessen the amount of money you pay in monthly premiums when you enroll in Marketplace insurance.

  • If you want, you can elect to get the full benefit of the credit when you complete your annual tax return.
  • Form 8962, Premium Tax Credit (PTC), must be completed and included to your tax return for the year, regardless of how you received your premium tax credit.
  • To find out more about the tax year 2020, please see the link provided below.
  • A refund of the entire amount of the credit is available if you do not owe any tax at all.

For information relevant to the tax year 2020, see the new Coronavirus Tax Relief section on this website.

  • If you have an excess APTC for 2020, you are not required to record it on your 2020 tax return or submit Form 8962, Premium Tax Credit (PTC)
  • But, if you have an excess APTC for 2019, you are obliged to declare it on your 2020 tax return. If you want to claim a net premium tax credit for 2020, you must file Form 8962, Premium Tax Credit (PTC)
  • Otherwise, you must file Form 8962, Premium Tax Credit (PTC).

For further information, please check the Premium Tax Credit for the Tax Year 2020:

  • For further information, please check the Premium Tax Credit for the Tax Year 2020: (PDF).

When filing your federal income tax return for tax years other than 2020, if you get the benefit of advance credit payments in any amount, or if you want to claim the premium tax credit, you must also file Form 8962, Premium Tax Credit (PTC), which must be attached to your return. On Form 8962, you claim the premium tax credit and reconcile the credit with the amount of advance credit payments you made for the year in order to calculate the credit. When filing a return for any tax year other than 2020, you must include a reconciliation of the credit with the amount of your advance credit payments, even if you aren’t normally obliged to do so.

The article Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments provides detailed instructions on how to file a return in order to claim and reconcile the credit.

Free volunteer aid, IRS Free File, commercial software, and professional assistance are all available as electronic filing choices.

How to reconcile your premium tax credit

It is necessary to “reconcile” your federal taxes if you had a Marketplace plan and made advance payments of the premium tax credit (APTC) to decrease your monthly payment. You can get more information about this at the IRS website. As a result, you’ll be comparing two figures: Any discrepancy between the two amounts will have an impact on your refund or tax liability. How to fill out Form 8962 with information from your 1095-A tax return

If you were enrolled in a 2021 Marketplace plan but didn’t file and”reconcile”your2020taxes, you’ll get a notice saying you may lose the financial help you’re getting for your 2022 plan. You may also get“Letter 0012C”from the IRS.Your notice will provide details. If you confirm that you filed your 2020 tax return, you won’t need to do anything else.

What information do I need from my 1095-A? Where do I find it on my 1095-A? Where do I enter iton Form 8962? See how
Enrollment Premiums Part III: Column AAnnual amount: line 33Monthly amounts: lines 21 — 32 Part II: Column aAnnual amount: line 11Monthly amounts: lines 12 — 23 Quick view
Second lowest cost Silver plan (SLCSP) premium Part III: Column BAnnual amount: line 33Monthly amounts: lines 21 — 32 Part II: Column bAnnual amount: line 11Monthly amounts: lines 12 — 23 Quick view
Advance payment of premium tax credit Part III: Column CAnnual amount: line 33Monthly amounts: lines 21 — 32 Part II: Column fAnnual amount: line 11Monthly amounts: lines 12 — 23 Quick view

Premium Tax Credit

When you enroll in a plan via the Health Insurance Marketplace®, you may be eligible for a tax credit that may be used to lessen your monthly insurance payment (also known as your “premium”). According to your income estimate and household details that you provided in your Marketplace application, you will get a tax credit. Eligibility for premium tax credit based on federal poverty levels (FPLs).

  • Income between 100 percent and 400 percent of the federal poverty level: If your income falls within this range, you are eligible for premium tax credits that reduce your monthly premium for a Marketplace health insurance plan in all states. Income exceeding 400 percent of the federal poverty level: If your income exceeds 400 percent of the federal poverty level, you may now be eligible for premium tax credits that would cut your monthly premium for a 2021 Marketplace health insurance plan.

Income between 100 percent and 400 percent of the federal poverty level: If your income falls within this range, you are eligible for premium tax credits, which reduce the amount of money you pay each month for a Marketplace health insurance policy. Individuals earning more than four hundred fifty percent of the federal poverty level (FPL) may now be eligible for premium tax credits, which will cut their monthly premium for a Marketplace health insurance plan beginning in the year 2021;

  • Using more advance payments of the tax credit than you qualify for based on your final yearly income, you will be required to make up the difference when you submit your federal income tax return. If you claim less premium tax credit than you are entitled to, you will receive the difference as a refundable credit when you submit your taxes
  • Otherwise, you will not receive a credit.

If you utilize more advance payments of the tax credit than you are eligible for based on your final yearly income, you will be required to make up the difference when you submit your federal income tax return. If you claim less premium tax credit than you are entitled to, you will receive the difference as a refundable credit when you submit your taxes; otherwise, you will not receive a refund.

Related content

  • Do you think you’ll be eligible for a premium tax credit? How to save money on your monthly insurance costs

Should I claim a premium tax credit in advance or at the end of the year or some of both?

That is all up to you. Having 1/12 of your annual premium tax credit transferred straight to your health plan each month might result in a significant reduction in your monthly premium right away. For those who can afford to do so, they can pay the whole health plan premium up front and receive the premium tax credit in one lump amount the following year when they submit their tax return, if applicable. Alternatively, you can have a portion of the tax credit sent straight to your insurer in advance while keeping a portion of the credit to claim as a refund when you complete your tax return at the end of the year.

When you submit your tax return later, the Internal Revenue Service (IRS) will compare your actual income to the amount of premium tax credit you claimed upfront.

During the year, if you did not get the whole amount of premium tax credit that you were entitled to, you may be able to recover the difference when you complete your tax return.

In this case, for example, if you are currently unemployed, you can estimate that your income will remain low throughout the year and receive a larger tax credit; however, should you obtain a new job during the year, you can report this increase in income to the Marketplace and reduce the amount of premium tax credit you receive for the remainder of the calendar year.

How Does the Tax Credit Work for Health Insurance?

You may be eligible for a health insurance tax credit, which can lower your monthly health insurance premiums. It is only accessible to people who purchase insurance via the marketplace, and you must fulfill certain income requirements in order to be eligible for this benefit. A health insurance tax credit can be applied for during open enrollment or after a qualified life event, such as getting married, having a child, or relocating to a new location. If you run a small business with less than 25 workers, you may also be eligible for government subsidies that might assist you in covering the costs of your employees’ health insurance coverage.

What is a health insurance tax credit?

A health insurance tax credit, often known as the premium tax credit, is a tax credit that may be used to minimize the cost of your health insurance. This reduction can be applied to your account on a monthly basis, or you can get the credit as a refund on your federal income tax liability. Implemented as part of the Affordable Care Act (ACA), the credit is intended to assist qualifying families or individuals with low to moderate incomes in their efforts to purchase health insurance. In order to be eligible for premium tax credits, you must enroll in an eligible insurance plan through either the federal or a state exchange.

The amount of the tax credit is the same in every state. If you were to live in New York, you would receive the same tax credits as you would in Arizona, for example.

How do I know if I qualify for a tax credit?

When you apply for health insurance through either the federal exchange or your state marketplace, your eligibility for tax credits is determined based on your income and household size. If your household family income falls between 100 percent and 400 percent of the federal poverty threshold, you may be eligible for health care tax credits (FPL). If your household income is less than this amount, you may be able to enroll inMedicaid benefits. Most states have now increased Medicaid eligibility to 138 percent of the federal poverty level (FPL), giving greater health care options for people with limited financial resources.

  • As part of the American Rescue Plan Act of 2021, the so-called “subsidy clif” of 400 percent FPL was repealed for the years 2021 and 2022, respectively.
  • Using our Affordable Care Act Subsidy Calculator, you can get an idea of whether or not you qualify for tax credits.
  • The amount of money you are eligible to receive is determined by two factors: the size of your family and your household income.
  • Consider the following scenario: if you have a family of three, your household can earn up to $87,840 per year and still be eligible for benefits.

What are the income limits for the health insurance subsidy?

A new set of income criteria is established each year by the Department of Health and Human Services (HHS). The current minimum and maximum qualifying income limitations, which are determined by the size of the household, are listed below. It is vital to remember that you would use the FPL for the current year to calculate eligibility and submit an application for the health care tax credits for the next year. In order to determine your household income in 2022, you would compare it to the FPL data from 2021.

Health insurance tax credit income criteria for 2022

Household/family size Eligible income range
1 $12,880–$51,520
2 $17,420–$69,680
3 $21,960–$87,840
4 $26,500–$106,000
5 $31,040–$124,160
6 $35,580–$142,320
7 $40,120–$160,480
8 $44,660–$178,640

How does the health insurance tax credit work?

There are two methods to qualify for the health care tax credits:

  • The advance premium tax credit (APTC) reduces the amount of money you spend on health insurance each month by using estimations. Because of the federal tax refund, you can get your health insurance subsidy in one lump sum at the end of the year, or you can reconcile any disparities between the subsidy and your monthly tax credits.

With the Advance Premium Tax Credit (APTC), you may lower your monthly health insurance costs by estimating how much you will spend in the future. You can get your health insurance subsidy all at once at the end of the year, or you can reconcile any disparities with your monthly tax credits, if you receive a federal tax return.

What happens if my family size or income changes during the year?

The impact of life-changing events on your tax credit eligibility can be both positive and negative, raising or lowering the amount of tax credits you are eligible to claim.

The following are examples of events that may have an impact on your premium tax credits:

  • The amount of tax credits that you are eligible to claim can be affected by life-changing events, which can either increase or decrease your eligibility for them. The following are examples of events that may have an impact on your premium tax credit:

Because your tax credit is determined by the marketplace, it is critical that you notify changes as soon as possible so that your health plan eligibility may be adjusted. Furthermore, if you are presently taking use of the advance premium tax credit, it is critical that you notify the marketplace of any changes in your circumstances as soon as possible. If you delay to notify such adjustments, it is possible that there will be disparities between what you paid and what you should have been charged.

If, on the other hand, you used less than the amount permitted, you may be eligible for an additional reimbursement.

Health Coverage Tax Credit (HCTC) vs. Premium Tax Credit (PTC)

In addition to premium tax credits, health coverage tax credits (HCTC) can minimize your health insurance premiums. However, they are not tied to premium tax credits. For qualifying individuals and families, health care tax credits (HCTCs) are refundable tax credits that cover 72.5 percent of their approved health insurance premiums. You would be responsible for the remaining amount of the premium payment. It is important to note that the HCTC is different from the health care tax credit stated above in that the latter is based on your income and family size.

You may be qualified if you meet any of the following criteria:

  • Because of a qualifying job loss, you may be eligible for Trade Adjustment Assistance. Individuals aged 55 to 64 who receive pension benefits from the Pension Benefit Guaranty Corporation

If you are awarded the HCTC, you will be sent a Form 1099-H (HCTC Advance Payments), which will include your disbursement information. In order to claim both the health coverage tax credit and the premium tax credit for the same health insurance coverage during the same calendar month, you must do so in separate calendar years.

What is the small business health care tax credit?

If you operate a small business, you may be eligible for a tax credit that allows you to deduct the cost of health insurance premiums for your employees that you pay. Small company owners that employ less than 50 full-time employees are often exempt from providing health insurance coverage to their employees. Because of this, the Small Business Health Care Tax Credit, which was established under the Affordable Care Act, incentivized small business owners to provide health insurance to their workers.

  • Insurance was obtained through the Small Business Health Options Program (SHOP)marketplace. It is necessary to have less than 25 full-time employees. Paid at an annual rate of less than $50,000 in average salaries Employers are responsible for at least half of all workers’ health insurance premiums.

If you meet the requirements, the federal government will provide you with a subsidy to assist you in paying for your part of employee premiums. The amount of credit you are eligible to earn will be determined by the size of your company and the number of individuals you have on staff.

For example, if your company had less than 10 full-time employees, you would be eligible for the maximum amount of credit available. A larger company with more than 25 employees would be eligible for a smaller tax credit.

Self-employed health care tax credit

Whether you are self-employed or employed by someone else, your eligibility for the health insurance tax credit is determined by the same FPL rules as are stated in the table above for families. Because self-employed persons are more likely than not to enroll in a marketplace plan, they will fulfill the first of the three eligibility requirements for health insurance tax credits. If you are self-employed, assessing the quantity of tax credits you should receive, on the other hand, becomes more complicated.

Your adjusted gross income (AGI) has a direct influence on the premium tax credit you get, which in turn has an impact on your eligibility for a deduction.

The simplified computation, on the other hand, often results in a tax credit that is less than the amount for which you are allowed to claim.

Frequently asked questions

Obtaining health insurance via Healthcare.gov or a state marketplace can lower the amount of money you pay on health insurance premiums. To be eligible, you must fulfill certain income requirements. It is possible to apply discounts monthly, so lowering your health insurance payment, or to earn credits in the form of a refund when you file your yearly income tax return.

How do you qualify for a tax credit for health insurance?

The health insurance marketplaces, whether federal or state-based, will determine whether you qualify for health insurance tax credits when you sign up for health insurance. Following the entry of your income and household size information, the marketplace application will determine whether or not you qualify for a subsidy and the amount of assistance you will get.

Do you have to pay back the health insurance tax credit?

No, the tax credits are intended to make health insurance more affordable, and any reductions you receive do not have to be repaid to the government.

What are the income limits for the premium tax credit in 2022?

Individuals with incomes between $12,880 and $51,520 are eligible for the Premium Tax Credit, depending on their age. The annual income of a family of four might range between $26,500 to $106,000. If you earn more than the income restrictions for your household size, a policy change in 2021 may still be able to help you qualify for the premium tax credit since the cost of health insurance is capped at 8.5 percent of income for those who are qualified under the current law.

Here’s how to avoid any tax time surprises with the health insurance premium credit

Krisanapong detraphiphat | Getty Images | Moment in time The health insurance premium tax credit was created to assist low-income Americans in paying for health insurance — but if you aren’t diligent, you may wind up owing money at tax time. If you aren’t careful, you could end up owing money at tax time. Those who purchase health insurance through one of the health-care exchanges established as part of the Patient Protection and Affordable Care Act, also known as Obamacare, are eligible to receive a refundable credit.

  • According to data from the Kaiser Family Foundation, 11.41 million people had gotten health-care insurance through one of the health-care insurance exchanges as of the end of the calendar year 2019.
  • More from the Personal Finance section: The new kid tax credit may be worth more to families than the stimulus package.
  • The pandemic increases state tax competition in an effort to attract firms and citizens.
  • The greater your credit score will be, the less money you make and the larger your family will be.
  • A family of four residing in Alaska will pay $33,130, while a family of four living in Hawaii would pay $30,480.
  • The credit was available to families with incomes up to $103,000 if they fell below the federal poverty level of $25,750 in 2019.
  • Gibson predicted that a family living at or below the poverty line in that year would receive a monthly credit of $1,336 and would incur a cost of $44 per month as a result of the program’s implementation.
  • Individuals who qualify for the credit can get the whole yearly amount at the end of the year, which can be used to reduce taxes owing or increase refunds to the extent that they qualify.
  • Participants in the plan may find the advance payments convenient, but they may have a major impact on your eventual tax liability if your circumstances change over the year.

“If you applied your advance payments to your premiums, you may find yourself owing money at the end of the year.” For those who had a child in the previous year, were laid off, or otherwise had their income decrease — which was a substantial risk for many lower-income Americans last year — you may be entitled to earn an extra credit on your tax return this year, depending on your circumstances.

Any changes can be made using a user account on the HealthCare.gov website, over the phone with your marketplace call center, or in person at a local health insurance exchange.

If you got advance payments of the credit throughout the year, you must reconcile the amounts you received with the amounts you are eventually qualified for by filing Form 8962 with your tax return, which may be found on the IRS website.

How Does Health Insurance Affect Your Taxes?

Despite the uncertainty of life, there is one thing you can count on: tax season will return at some point in the future. You will need to spend some time assembling all of your financial and health insurance paperwork in order to be prepared. Regardless of whether you were eligible for a premium tax credit or not, we’ll explain how to determine which of these tax forms you should have received in the mail.

What is a premium tax credit?

An incentive for small company owners to give health insurance to their employees for the first time or to keep the coverage they already have is included in the Affordable Care Act’s small business health insurance tax credit. The amount of tax credits claimed is deducted directly from the amount of a person’s or business’s tax liability; as a result, tax credits are used to decrease taxes dollar for dollar.

How the small business health insurance tax credit works

Small firms that pay at least half of the cost of single health insurance coverage for their employees are eligible for the health insurance tax credit. If your company and plan fulfill the requirements, you may be able to claim a credit of up to 50% of the health insurance premiums you paid for your employees, but not for yourself as the business’s sole proprietor. In order to be eligible for the small company health insurance tax credit, you must meet the following requirements:

  • Be limited to less than 25 full-time equivalent workers Possess annualized average earnings that are less than $56,00 (the IRS adjusts the annualized average wage for inflation, which increases each year)
  • Use an IRS-qualified plan to pay these premiums, which is often an arrangement in which you agree to pay a consistent percentage (not less than 50 percent) of the premium cost for each registered employee’s health insurance coverage.

Self-employment tax deductions are available for you, your spouse, and any dependents who live with you if your firm (sole proprietorship or single member LLC) was successful during the year. An income tax deduction varies from a tax credit in that it decreases your taxable income; as a result, the value of the deduction is determined by the taxpayer’s marginal tax rate, which grows in tandem with his or her earning capacity. Expenses for medical insurance, dental insurance, and long-term care insurance can all be deducted from your income as a self-employed health insurance deduction.

What forms should you use on your 2021 taxes?

When you file your taxes in 2021, you will need to declare your health insurance coverage on a variety of different forms. It is vital to remember that these forms will differ depending on the following factors:

  1. To report your health insurance on your 2021 taxes, you will need to complete a variety of documents. Note that the forms will differ depending on the following factors:

There are several different forms that you will need to complete in order to record your health insurance on your 2021 tax return. It is crucial to remember that these forms will differ depending on the following factors:

What does it mean to “reconcile” your premium tax credit?

To “reconcile” your premium tax credit if you purchased a health plan through a private or government-sponsored marketplace and used premium tax credits, you must first “reconcile” your income. You will need to perform the following steps in order to do this.

  1. Record the amount you utilized to decrease your monthly premium payments throughout the course of the year in a separate document. Calculate the real amount of financial aid that you will be eligible for in 2021 based on your final income for the year
  2. Comparing the figures from Steps 1 and 2 will reveal that the first figure is more accurate. It is possible that there may be a discrepancy between the figures from Step 1 and Step 2, in which case you will be required to either pay more monies or obtain a tax refund.

The good news is that Form 1095-A will assist you in completing Steps 1-3 quickly and properly, allowing you to decide whether or not you owe more taxes or whether or not you will receive a tax refund.

And don’t forget: if you didn’t take advantage of any premium tax credits that were available to you throughout 2020, you must submit Form 8962 in order to obtain your tax refund!

How does good recordkeeping help at tax time?

When you keep meticulous records, filing your taxes becomes much simpler. Keep in mind that your health insurance will provide you with the information you require in order to complete your Form 1095-A correctly. It is possible that you may need to reconcile your premium tax credit and properly complete Form 8962 in order to obtain your tax refund (if applicable). You will be able to more readily grasp how your unique health plan will influence your taxes at the end of the year if you keep accurate records throughout the year.

They can also help you identify whether you are qualified for any tax-advantaged marketplace plans or government-sponsored health programs.

Please contact us if you would like to learn more about your health insurance options or to compare the small business health insurance plans that are available in your region.

Instead of relying on this article for tax, accounting, or legal advice, you should consult with your own tax, accounting, or legal advisors.

What is the Premium Tax Credit (PTC) and What is Tax Form 8962?

Updated for Tax Year 2021 / August 16, 2021 04:26 a.m. (Eastern Standard Time). OVERVIEW The premium tax credit became effective for the 2014 tax year and gives tax savings to individuals who qualify, allowing them to defray the cost of health insurance. It is available to those who qualify. The premium tax credit was established following the passage of the Affordable Care Act in 2009. To be eligible for this refundable tax credit, you must fulfill certain conditions and complete Form 8962 with your tax return.

However, what exactly is Tax Form 8962?

What is the premium tax credit?

When you enroll in a health plan via the Health Insurance Marketplace, you may be eligible for a premium tax credit, which is a refundable tax credit that can help decrease your insurance premium payments. When you apply for coverage in the Marketplace, you can obtain this credit before you file your tax return by calculating your projected income for the year when you fill out the application. As a result, it qualifies for the advance premium tax credit. Also available after the fact is the ability to claim your premium tax credit on your federal income tax return together with your real income.

In order to be eligible for the premium tax credit, you must have an estimated income that falls between 100 percent and 400 percent of the federal poverty limit for a household your size.

Using more of your premium tax credit than your ultimate taxable income permits means you’ll have to make up the difference when it comes time to file your Form 1040.

The American Rescue Plan Act of 2021 delayed the obligation to refund any excess of advance payments of the Premium Tax Credit when submitting your Form 1040 for tax year 2020. This is crucial to remember when you prepare your Form 1040 for this year.

Eligibility requirements for the premium tax credit

In order to be eligible for the premium tax credit, you must fulfill all of the requirements listed below:

  • You must obtain your health insurance coverage through the Health Insurance Marketplace. Health insurance coverage via alternate sources such as your work or the government is not available to you. Your income must fall inside a specific range in order to qualify. It is impossible for someone else to declare you as a dependant on their tax return. If you are married, you must submit a joint income tax return.

Changes in your income and family size may have an impact on your eligibility; thus, you should notify the Marketplace of any changes to ensure that you get the proper tax credit. The federal poverty level is used to calculate the income ranges that are eligible for the premium tax credit under the premium tax credit program. The United States Department of Health and Human Services publishes the yearly federal poverty levels, which differ based on whether you live in the contiguous 48 states and the District of Columbia, Hawaii, or Alaska, or elsewhere in the country.

An individual earning between $12,880 and $51,520 in 2021 meets the income requirements to qualify, while a family of four qualifies with household earnings between $26,500 and $106,000 in 2021 meets the income requirements to qualify.

Form 8962 will be used to evaluate whether or not you are eligible to claim the premium tax credit in its entirety.

What is Tax Form 8962?

If you purchased health insurance on the Healthcare.gov website — or through your state healthcare marketplace, if you reside in a state that has one — you’ll need to file Tax Form 8962 with the Internal Revenue Service. There are two sections to this form that you must complete:

  1. Determining whether or whether you are eligible for the credit
  2. Making a claim for the premium tax credit

For the purposes of reconciling any premium tax credit payments you may be qualified for with any advanced premium tax credit payments you have already received, Form 8962 is also needed. The first section of the form calculates your yearly and monthly contribution amounts depending on your family’s income and the number of tax dependents in your household. Your tax family typically consists of you and your spouse, if you are filing a joint return, as well as your dependents. You must include all of the revenue earned by your family or home.

You have two options when it comes to claiming it:

  • In exchange for a credit, you can lower your monthly payments for your health insurance premiums. A tax credit that can be used to lower your taxes on your return

If you choose monthly payments, the government pays your insurer over the course of the year, resulting in a reduction in your monthly insurance premium rates. If you are eligible to claim the premium tax credit and your insurer has received advance payments from the government, the second section of Form 8962 compares how much credit you have utilized to how much credit you have left to claim the premium tax credit. There are three different situations that might occur:

  • If you chose to obtain the refundable premium tax credit on your tax return, you may be eligible to claim it as a credit against your tax due. As long as you have more credit available than the amount of insurance payments paid on your behalf, you can claim the leftover balance on your tax return to minimize your tax liability. It is possible that you understated your income and the government paid out more than your real credit value
  • In this case, you will be required to return the difference when you submit your taxes.

When you purchase health insurance via the Marketplace, you will be asked to enter information about your family size and income in order to evaluate if you are eligible for a premium tax credit. In the course of the year, you may see a shift in your income that is different from what you anticipated when you submitted your Marketplace application. Consequently, you may find yourself in different conditions at the end of the year, such that you may have credit left over or that you may be required to return part of your credit debt.

Remember, with TurboTax, we’ll ask you a few easy questions about your life and assist you in filling out all of the necessary tax paperwork. With TurboTax, you can be certain that your taxes will be completed correctly, whether they are basic or complex tax returns, regardless of your situation.

All you need to know is yourself

Provide straightforward answers to a few easy questions about your life, and TurboTax Free Edition will take care of the rest. Simple tax returns are all that are required.

How It Affects Your Taxes

Because of the American Rescue Plan, there are significant changes to the way you file your taxes for your health insurance. See the details below for further information. Healthcare.gov is a government website that provides health insurance.

Marketplace Coverage Changes and Coronavirus

As a result of the Coronavirus and changes to health care in general, there have been a number of adjustments to Marketplace health insurance coverage:

  • Lower rates for health insurance through the Marketplace
  • New criteria to assist pay for health insurance
  • Enrollment durations that are longer
  • Reporting the excess advance payments for the Premium Tax Credit (APTC) on your 2020 tax return alone will be affected by the new rules. Health Plans and Prices for the Years 2021 and 2022

Visit the Healthcare.gov website for further information and specifics on enrolling in health insurance through the Marketplace (Healthcare.gov). Your health insurance must be reported on your return only if you or a family member was enrolled in health insurance through the Marketplace and if you or a family member received advance payments of the Premium Tax Credit, which were used to reduce the amount of your monthly premium payment, on your tax return. In the event that you begin an uncomplicated free tax return on eFile.com, we will immediately submit the essential information on your health insurance and the Premium Tax Credit on the appropriate tax forms.

Reporting Your Health Insurance for the Premium Tax Credit

Except if you or a family member was enrolled in health insurance through the Marketplace and advance payments of the Premium Tax Creditwere given to your insurance company in order to decrease your monthly premium payment, you no longer need to declare health insurance coverage for the tax year. As soon as you complete your tax return on eFile.com and specify that you need to record your advance payments in order to compare them to your Premium Tax Credit for the year, we will produce the necessary tax papers so that you don’t have to worry about it.

What You Should Do If You Have Health Insurance – eFile.com will only require information from your Form 1095-A to record your payments for thePremium Tax Crediton your tax return; you will not require any further information.

Here is further information about the 1095-A, as well as other insurance papers that were sent to you only for your convenience.

  • For more information, see Document 1095-A, “Health Insurance Marketplace Statement.” If you purchased health insurance via the Health Insurance Marketplace exchange, you’ll get this form. It will give you with information if you need to attach Form 8962 for the Premium Tax Credit with your submission. If you or your family members have registered in more than one health plan via the Marketplace, you will get a Form 1095-A for each insurance you have purchased through the Marketplace. A copy of each Form 1095-A will be provided to the Internal Revenue Service as well. Form 1095-A will not need to be included with your return, but you will be able to utilize the information from it when preparing your return on eFile.com, and a Form 8962 will be produced for you to send with your return. It is necessary to include Form 8962 with your return in order to claim the credit and reconcile your advance credit payments. If you, your spouse, and any dependents have qualifying health insurance coverage for part or the entire year, you should file Form 1095-B, which is provided by your insurance provider. This form contains the information you need to report on your tax return if you, your spouse, and any dependents have qualifying health insurance coverage for part or the entire year. This form is intended just for your personal information and will not be included in your tax return. You will only be required to enter healthcare information if you were insured through the Marketplace and received Form 1095-A
  • Form 1095-C – Employer-Provided Health Insurance Offer and Coverage- This form will be provided to you by your employer and contains information about the health coverage offered to you by your employer. Form 1095-C – Employer-Provided Health Insurance Offer and Coverage- This form will be provided to you by your employer and contains information about the health coverage offered to you by your This form is intended just for your personal information and will not be included in your tax return. You will only be required to enter healthcare information if you purchased health insurance through the Marketplace and received Form 1095-A
  • Form 8962 – Premium Tax Credit- This form will be prepared for you on eFile.com if you purchased health insurance through the Marketplace and are eligible for the Premium Tax Credit and wish to claim it
  • Form 8962 – Premium Tax Credit- This form will be prepared for you on eFile.com if you purchased health insurance through the Marketplace and are eligible for the Premium Tax

Health Insurance Marketplace Statement (Form 1095-A): If you obtained health insurance via the Health Insurance Marketplace exchange, you will get this form. In the event that you are required to submit Form 8962 for the Premium Tax Credit, this document will supply you with the necessary information. Those who have registered in more than one health plan via the Marketplace will get a separate Form 1095-A for each coverage they have purchased. A copy of each Form 1095-A will be submitted to the Internal Revenue Service as well as to the taxpayer.

It is necessary to submit Form 8962 with your return in order to claim the credit and reconcile your advance credit payments.

This form is provided by your insurance provider and contains the information you need to report on your tax return to demonstrate that you, your spouse, and any dependents have qualified health insurance coverage for part or the entire year.

There is no need to file this form with the IRS because it is for your information alone.

Form 1095-A – Health Insurance Marketplace Offer and Coverage- This form will be provided to you by the Marketplace and contains information about the health coverage offered to you by the Marketplace; and Form 1095 There is no need to file this form with the IRS because it is for your information alone.

If you purchased health insurance through the Marketplace and are eligible to claim the Premium Tax Credit, you will only need to enter your healthcare information once; Form 8962 – Premium Tax Credit (if you purchased health insurance through the Marketplace and received Form 1095-A); Form 8962 – Health Insurance Marketplace – If you purchased health insurance through the Marketplace

If You Don’t Have Health Insurance

On your 2021 Tax Return, you will no longer be required to record that you had health insurance during the year or to pay a penalty if you did not have health insurance. However, if you still intend to get health insurance through the Marketplace, the information provided below may be of assistance. In the event that you do not have health insurance through your work, you can sign up for it through the Marketplace during the Open Enrollment period (Nov. 1 to Dec. 15, 2021 or Jan. 15, 2022 – SeeHealth Insurance Eventsbelow).

If any of the following scenarios apply to you, you may be able to obtain coverage during the Special Enrollment Period: 1) Changes in your life during the Special Enrollment Period:

  • On your 2021 Tax Return, you will no longer be required to record that you had health insurance throughout the year or to pay a penalty if you did not have health insurance at all. For those who still desire to purchase health insurance through the Marketplace, the information provided below may be helpful. In the event that you do not have health insurance through your work, you can sign up for it through the Marketplace during the Open Enrollment season (Nov. 1 to Dec. 15, 2021 or Jan. 15, 2022 – SeeHealth Insurance Eventsbelow). You may be qualified for a Special Enrollment Period if you do not enroll during the Open Enrollment time. This period allows you to purchase coverage through the Healthcare.gov Market Place even if you do not participate in the Open Enrollment period. If any of the following apply to you, you may be able to obtain coverage during the Special Enrollment Period. 1) Changes in Personal Situations during the Special Enrollment Period :

On your 2021 Tax Return, you will no longer be required to record that you had health insurance throughout the year or to pay a penalty if you did not have health insurance throughout the year. However, if you still desire to acquire health insurance through the Marketplace, the information provided below may be helpful. In the event that you do not have health insurance through your work, you can sign up for coverage through the Marketplace during the Open Enrollment period (Nov. 1 to Dec. 15, 2021 or Jan.

If you miss the Open Enrollment period, you may be qualified for the Special Enrollment Period, which allows you to purchase coverage through the Healthcare.gov Market Place outside of the Open Enrollment period.

  • Medicaid and the Children’s Health Insurance Program (CHIP) are two options for coverage provided you meet the eligibility requirements. For these programs, which provide free or low-cost health care to millions of Americans, there is no set registration period
  • Instead, you can apply at any time.

If you do not qualify for health insurance under any of the two scenarios discussed above, your employer may be compelled to provide you with coverage; thus, you should check with them as well. It is mandatory for your company to provide you with health insurance if they employ 50 or more employees. If you are unable to obtain coverage through your workplace, you can still purchase insurance privately or via the HealthCare.gov Marketplace (during the Open Enrollment period), but you will not be eligible for a subsidy, which is a reduction in the cost of your health insurance premium.

  1. A subsidy is a reduction in the cost of health insurance premiums.
  2. The credit, on the other hand, is applied immediately to the price of your premium and so functions as a reduction.
  3. The more your subsidy is, the lower your income (and the larger your family) must be to qualify.
  4. Households with earnings less than 250 percent of the poverty line will be eligible for additional subsidies, which will be referred to as cost-sharing support.
  5. If their native states are participating in the Medicaid expansion allowed by the Affordable Care Act, more people, even single adults, may be eligible for Medicare.
  6. The official poverty threshold for citizens of most states in 2021 ranged from $12,880 for an individual to $44,660 for a family of eight, according to the Census Bureau.
  7. 1st of November, 2021 For coverage beginning in 2022, there is an open enrollment or change plans period.
  8. If you join and pay your first payment by December 15, 2021, your coverage for 2022 will start immediately.

The deadline for filing your tax return is February 1, 20222021. The date is April 18, 2022. Report changes in income and household composition to Healthcare.gov for the entire year 2021 and 2022.

Related Health Care Tax Information

  • Premium Tax Credit
  • Deducting Medical Expenses on Your Tax Return
  • Health Savings Accounts and Taxes

TurboTax ® is a trademark of Intuit, Inc. and is used under license. HRB Innovations, Inc. owns the trademark H R Block ®, which is a registered trademark of the company.

What Is the Health Care Tax Credit?

When you apply for health insurance through the marketplace, the marketplace will estimate your tax credit based on the information you provide about your family, your projected household income, and other factors such as whether anyone you are enrolling is eligible for other types of coverage and whether you have children. In order to qualify, you will need to supply your modified adjusted gross incomeas well as the incomes of each and every other member of your immediate family. The majority of consumers take use of all or part of their tax credits “in advance” in order to minimize their monthly insurance payment.

  • However, even though the credit is not normally a lump sum that you apply for at tax time every year, you must still file a tax return that includes Form 8962: “Premium Tax Credit,” which is an annual tax return.
  • By the middle of February, you should have received in the mail your annual form 1095-A, which contains all of the relevant information regarding your insurance coverage, premiums, and advance payment of tax credits.
  • Additionally, if your income or family size varies throughout the year, your credit score may alter as well, and there are online tools to help you assess these variances as well.
  • Alternatively, you can change your status on the marketplace to allow you to alter your premiums throughout the calendar year.
  • Tax credits, on the other hand, immediately decrease the amount of tax you owe, whereas deductions just reduce your taxable income.

How the Advanced Premium Tax Credit Impacts 2016 Tax Returns

A tax credit may be available to you if you purchase health insurance through a government-sponsored marketplace. This credit can be used to offset the cost of your health insurance premiums. As a result, you will never see the money since the credit is given directly to the insurance provider to be used to balance your rates. Consequently, it might be simple to lose track of the amount of credit that has been granted.

If nothing has changed in your financial or familial status during the course of the year, you may be OK. Although the situation may have remained the same, the credit amount you were previously eligible for may have changed.

Tax refunds can be affected.

With the exception of salaried employees, predicting how much you’ll make in a year is not usually straightforward. In the same way, being underemployed, jobless, self-employed or working seasonally is not a good thing to be. Consequently, while applying for health insurance via the marketplace, you most likely approximated your gross income. For the 2020 tax year, you must reconcile the amount of tax credit you got with the amount of tax you should have paid based on your actual earnings for the year.

If your reconciliation resulted in a larger tax credit than you were entitled to, this indicates that you overestimated your earnings.

When this occurs, the difference is either included as part of your refund or deducted from your total income tax liability.

If you overestimated your income and were approved for less credit than you actually utilized, you may be required to repay part of the credit you received.

Income adjustments may influence eligibility.

If your income changes at any point during the year, you must notify the Marketplace as quickly as possible of the change. If required, the amount of your advanced premium tax credit might be adjusted accordingly. Changes can be reported online by signing into your account. Alternatively, you can call the Marketplace Call Center at 1-800-318-2596 for further information (TTY: 1-855-889-4325). It is not necessary to notify a change by sending a letter through the mail.

Life changes make a difference too.

If you are eligible for the advanced premium tax credit, you should also update your Marketplace account with any changes in your personal circumstances. These are some examples:

  • Having a kid by birth or adoption
  • Loss of a kid’s reliance, for example, when the youngster goes out on his or her own or when the child’s other parent qualifies for the exemption
  • Whether to marry or divorce
  • This is a motion
  • Change in eligibility for employer-sponsored health insurance or other health-care coverage
  • Change in the status of a disabled person
  • There have been other changes to your income and the size of your home

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