The premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace.
What is a premium tax credit and how does it work?
The premium tax credit is a refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange. The size of your premium tax credit is based on a sliding scale.
Do I have to pay back premium tax credit?
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. If you’ve taken less than you qualify for, you’ll get the difference back.
How do premium tax credits affect my refund?
How advance credit payments affect your refund. If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported on Form 1040, Schedule 3.
Who pays the premium tax credit?
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.
How do I claim premium tax credit?
Use the information on Form 1095-A to claim the credit or reconcile advance credit payments on Form 8962, Premium Tax Credit. File Form 8962 with your Form 1040, Form 1040-SR or Form 1040-NR.
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.
What are examples of refundable tax credits?
Common refundable tax credits include:
- American opportunity tax credit. Available to filers who paid qualified higher education expenses.
- Earned income tax credit. Paid to eligible moderate- and low-income working taxpayers.
- Child tax credit.
- Premium tax credit.
Is it a good idea to use tax credit for health insurance?
The premium tax credit helps lower-income Americans pay for health insurance but, if you’re not careful, you could end up owing money at tax time. Getting a lump sum at year end can help you save on taxes, but most elect to have advance sums applied to monthly premiums — potentially altering their tax burden.
Will I get penalized if I underestimate my income for Obamacare?
It’s normal for most people to overestimate or underestimate their ACA premium tax credit by a small amount. There’s no added penalty for taking extra subsidies. The difference will be reflected in your tax payment or refund.
Is premium tax credit based on gross income?
Eligibility for premium tax credits is based on your Modified Adjusted Gross Income, or MAGI. When you file a federal income tax return, you must report your adjusted gross income (which includes wages and salaries, interest and dividends, unemployment benefits, and several other sources of income.)
What is the premium tax credit for 2019?
In tax year 2019, the maximum payment ranged from $600 for married couples with incomes below 200 percent of FPL to $2,650 for couples with incomes of at least 300 but less than 400 percent of FPL (table 2). Families whose income equals 400 percent or more of FPL have no limit on reconciliation payments.