Premium tax credits reduce your premium for most Marketplace policies. The amount of the tax credit you may receive depends on your income and the cost of Marketplace health plans in your area.
The Marketplace will determine the expected contribution you are required to pay toward the premium for a mid-range (Silver) benchmark plan. The expected contribution will increase on a sliding scale based on your 2024 income. If your income is between the poverty level and 150% of the poverty level, the expected contribution you would be required to pay toward the benchmark plan is $0. And, once your income reaches 400% of the poverty level, the expected contribution you would be required to pay toward the benchmark plan is 8.5% of your income.
The difference between the premium for the benchmark plan and your expected contribution equals the amount of your tax credit. (You do not have to pay more than the actual premium for the plan.) The Marketplace will tell you what that dollar amount is. You can use that amount to help pay the premium for any Bronze, Silver, Gold, or Platinum plan offered in the Marketplace. The credit cannot be used to pay for a Catastrophic plan.
Premium tax credits may be claimed at the end of the year, or you can apply for an advanced premium tax credit based on your estimated income for the up-coming year. If you elect to receive an advanced credit, the government will pay 1/12 of the credit directly to your insurance company each month and the insurer will bill you for the rest of the premium.
It’s important to keep in mind that when you apply for the premium tax credit during Open Enrollment, you may not know for sure what your income for the coverage year will be, so you will apply based on your best estimate. Later, when you file your tax return, the IRS will compare your actual income to the amount of premium tax credit you claimed in advance. If you underestimated your income and claimed too much premium tax credit, you might have to pay back some or all of the difference. If you didn’t receive all of the premium tax credit you’re entitled to during the year, you can claim the difference when you file your tax return. You should report any changes in your income during the year to the Marketplace, so your credit can be adjusted and you can avoid any significant repayments at the end of the year.
FAQs
The difference between the premium for the benchmark plan and your expected contribution equals the amount of your tax credit. (You do not have to pay more than the actual premium for the plan.) The Marketplace will tell you what that dollar amount is.
How does the premium tax credit affect my tax return? ›
If you used more premium tax credit than you qualify for, you'll pay the difference with your federal taxes. If you used less, you'll get the difference as a credit. Refer to glossary for more details. ” when you file your federal taxes.
Will I have to pay back my 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 does the federal premium tax credit 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.
How is premium tax credit calculated? ›
Calculation of the Federal Advance Premium Tax Credit
The APTC equals the difference between (1) the cost of the “second-lowest cost silver plan” available to you (based on your age, family size, and county of residence) and (2) the maximum amount you are expected to pay towards your health insurance premiums.
What disqualifies you from the premium tax credit? ›
To be eligible for the premium tax credit, your household income must be at least 100 percent and, for years other than 2021 and 2022, no more than 400 percent of the federal poverty line for your family size, although there are two exceptions for individuals with household income below 100 percent of the applicable ...
Should I use all tax credits for health insurance? ›
You can use all, some, or none of your premium tax credit in advance to lower your monthly premium. If you use more advance payments of the tax credit than you qualify for based on your final yearly income, you must repay the difference when you file your federal income tax return.
How do I avoid premium tax credit repayment? ›
Avoiding or Reducing Premium Tax Credit Repayments
The key to reducing the amount of premium tax credits you have to repay is keeping your household income below 400% of the federal poverty level. As long as your income is below this level, your repayments are capped.
Why do I owe money after entering my 1095-A? ›
You are having to pay back the premium subsidies you received (column C) because you were not eligible based on your actual income, family size, and zip code. When you enrolled, you qualified for those subsidies based on your estimates of those 3 things: income, family size, and zip code.
Why did my premium tax credit go down? ›
The amount of your Premium Tax Credit is based on both the number of people in your household and your household income. If your income goes up or down at any point during the year, you need to update the Marketplace with that information as soon as possible, so that your Premium Tax Credit can be adjusted.
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. You must file a return to reconcile the credit with the amount of your advance credit payments even if you're usually not required to file.
What is the highest income to qualify for Obamacare? ›
Who is eligible for health insurance subsidies? In 2024, you'll typically be eligible for ACA subsidies if you earn between $14,580 and $58,320 as an individual. For a family of four, you're eligible with a household income between $30,000 and $120,000.
How to get a $10,000 tax refund in 2024? ›
How do I get a 10,000 tax refund? You could end up with a $10,000 tax refund if you've paid significantly more tax payments than you owe at the end of the year.
Will I have to pay my premium tax credit back? ›
If your income is more than what you told us on your application, you may have to repay some or all of the advanced premium tax credits that you got.
Will I get penalized if I underestimate my income for Obamacare? ›
They will inquire about your tax return from the IRS and other databases. If you underestimated your income for that year and received a subsidy, you will need to pay the entire subsidy back the next time you file your taxes. You must report income changes to Covered California within 30 days.
How do you reconcile premium tax credits on their tax return? ›
To reconcile, you compare two amounts: the premium tax credit you used in advance during the year; and the amount of tax credit you qualify for based on your final income. You'll use IRS Form 8962 to do this. If you used more premium tax credit than you qualify for, you'll pay the difference with your federal taxes.
Will a 1095 lower my tax return? ›
Yes. In some cases, the information on the corrected Form 1095-A may be in your favor – it may decrease the amount of taxes you owe or increase your refund.
Do tax credits reduce tax return? ›
You can use credits and deductions to help lower your tax bill or increase your refund. Credits can reduce the amount of tax due. Deductions can reduce the amount of taxable income.
Does Obamacare affect your tax return? ›
Obamacare and the premium tax credit
It makes health insurance premiums for coverage purchased through the Health Insurance Marketplace more affordable for eligible individuals. The premium tax credit is the main way that having Obamacare impacts your taxes.
