What is the Healthcare Premium Tax Credit


Facts About the Premium Tax Credit for Individuals and Families

If you — or anyone on your tax return — purchased health coverage from a state or the federally-facilitated Health Insurance Marketplace and are eligible for the premium tax credit, you will have to file Form 8962, Premium Tax Credit, with your federal income tax return in 2015.

When you applied for Marketplace coverage in 2014, you could have chosen to have advance payments of the premium tax credit paid directly to your insurance company to lower your outof-pocket cost for monthly premiums during the year. If you chose this option, you must file a tax return and attach Form 8962, Premium Tax Credit.

You can electronically file Form 8962, Premium Tax Credit, along with your federal tax return. Filing electronically is the easiest way to file a complete and accurate tax return. By electronically filing your tax return, many common errors may be avoided or corrected by the computer software. Depending on your income, you may even qualify to e-file for free by using Free File tax software.

What is the premium tax credit?

The premium tax credit is a credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace.

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is the place where you will find information about private health insurance options, purchase health insurance, and obtain help with premiums and out-of-pocket costs if you are eligible. Learn more about the Marketplace at HealthCare.gov.

How do I get the premium tax credit?

When you apply for coverage in the Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums. If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size.

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

The actual premium tax credit for the year will differ from the advance credit amount estimated by the Marketplace if your family size and household income as estimated at the time of enrollment are different from the family size and household income you report on your return. The more your family size or household income differs from the Marketplace estimates used to compute your advance credit payments, the more significant the difference will be between your advance credit payments and your actual credit.

Claiming the Premium Tax Credit

Only individuals who purchased coverage through the Health Insurance Marketplace may be eligible to claim a premium tax credit when filing a tax return in 2015.

In general, you or anyone on your tax return who enrolled in coverage through the Marketplace in 2014 may be eligible to claim a premium tax credit if you:

  • are within certain income limits;
  • do not file a Married Filing Separately tax return, unless you meet certain criteria; or
  • cannot be claimed as a dependent by another person.

Additionally, the person on your tax return who enrolled must not have been eligible for other qualifying coverage, such as government-sponsored coverage or employer-sponsored coverage for the same months.

Reconciling Advance Payments of the Premium Tax Credit

If you chose this option, you must file your tax return and attach Form 8962, Premium Tax Credit, to reconcile any advance payments made directly by the government to your insurance provider during the year, even if you do not otherwise have to file a tax return. You do this by comparing any advance credit payments with the amount of the premium tax credit actually allowed on the federal income tax return.

If the premium tax credit computed on your federal income tax return is more than the advance credit payments, the additional amount of the credit will increase your refund or lower the amount of tax you owe.

If the credit on the tax return is less than the amount paid in advance, you will have to repay excess advance payments, which will increase the amount you owe or result in either a smaller refund or a balance due.

The Marketplaces are required to send Form 1095-A, Health Insurance Marketplace Statement, to individuals by Jan. 31, 2015. This form includes information about your coverage and any advance credit payments made directly to your insurance provider in 2014. Contact the Marketplace directly if you did not receive your Form 1095-A. You need Form 1095-A to accurately complete your tax return.

Reporting Qualifying Health Care Coverage

If you have minimum essential coverage, you will check a box indicating that you do have minimum essential coverage when you file your 2014 federal income tax return. If you — or anyone on your return — purchased a health plan through the Marketplace, this means you have minimum essential coverage. In addition to filing Form 8962, Premium Tax Credit, with your tax return, you will simply need to check a box on your tax return to indicate that you and your dependents had qualifying coverage for each month of 2014.

For more information about the premium tax credit, view Publication 5187, The Health Care Law: What’s New for Individuals & Families, or visit IRS.gov/aca. For more information about the Marketplace, visit HealthCare.gov or your state Marketplace website.


See: Explanation of the Affordable Care Act (Obamacare) Penalty for Individuals and Families

See: What Businesses Need to Know About the Affordable Care Act (Obamacare)

For help with the Affordable Care Act (Obamacare), or another IRS matter, contact us now at 1-949-260-4770 for a FREE consultation with our CPAs and former IRS Agents.  

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