What Is the Premium Tax Credit?
The Premium Tax Credit is a refundable tax credit that can be claimed by eligible individuals and families with low to moderate incomes (between 100 and 400% of the federal poverty line) to help them afford health insurance purchased through the Health Insurance Marketplace (or the Exchange) at HealthCare.gov.
You must file a tax return with Form 8962 in order to claim the credit. Claim the credit in one of the following ways:
- Have the credit paid in advance to your insurance company in order to decrease your monthly premium payments (you will need to reconcile the amount paid in advance with the actual credit you calculate) OR
- Claim all of the credit on your tax return.
Find out if you qualify for the premium tax credit by preparing and efiling your return on efile.com. Once you answer a few simple tax questions, we will use your answers to determine your eligibility (as well as your credit amount).
Do You Qualify for the Premium Tax Credit?
If you meet all of the following requirements, you may qualify for the credit:
- you do not qualify for coverage through an employer or government plan,
- you buy health insurance through the Marketplace,
- you are within certain income limits,
- you cannot be claimed as a dependent on another person's tax return AND
- you do not file as Married Filing Separately (unless you are a victim of domestic abuse and spousal abandonment).
You are not eligible for the credit if you enroll in an employer-sponsored health insurance plan (including retiree coverage), even if the plan is unaffordable or fails to provide minimum value.
Premium Tax Credit and Married Filing Separately Tax Return Status
Generally, you cannot use the Married Filing Separately filing status and claim the Premium Tax Credit on your tax return. However, there is an exception for taxpayers who are victims of domestic violence and spousal abandonment; they can claim the relief from the Married Filing Jointly filing status requirement for no more than three consecutive years).
According to the IRS, a married taxpayer who lives apart from his or her spouse for the last six months is considered unmarried for the entire year if he or she meets the following requirements:
- Files a separate tax return,
- Maintains a home with a dependent child for more than half the year, AND
- Furnishes over half the cost of the household during the year.
Premium Tax Credit Qualifications
Individuals and families whose household income is between 100 and 400% of the federal poverty line for their family size are generally eligible for the credit. The federal poverty guidelines are established each year by the U.S. Department of Health and Human Services.
Income Values Under the Federal Poverty Line
Important: These values are for 2017 Tax Returns only. We will update them when the 2018 values are available.
Below are the 2017 income values that fall between the 100 and 400% federal poverty line (for residents of one of the 48 contiguous states or Washington D.C.). You can use these values for your 2017 tax return:
- $12,060 (100%)-$48,240 (400%) for one individual
- $16,240 (100%)-$64,960 (400%) for a family of two
- $20,420 (100%)-$81,680 (400%) for a family of three
- $24,600 (100%)-$98,400 (400%) for a family of four
- $28,780 (100%)-$115,120 (400%) for a family of five
- $32,960 (100%)-$131,840 (400%) for a family of six
- $37,140 (100%)-$148,560 (400%) for a family of seven
- $41,320 (100%)-$165,280 (400%) for a family of eight
Unfortunately, you will not qualify for the credit if you are also eligible for coverage through your state's Medicaid program that is above the federal poverty line levels.
For the purposes of qualifying for the Premium Tax Credit, it is your modified adjusted gross income (AGI) plus the AGI of every other individual in your family who can claim a personal exemption and is required to file a tax return. Modified AGI is your AGI plus any excluded foreign, nontaxable Social Security benefits (including Tier 1 Railroad Retirement benefits) and tax-exempt interest received or accrued during the Tax Year. However, it does not include Supplemental Security income (SSI).
How to Claim the Premium Tax Credit
If you apply for health insurance in the Marketplace and you qualify for the credit, you will need to claim the credit on your tax return, regardless of whether or not you are required to file a return. Use Form 8962, Premium Tax Credit, to calculate and report your Premium Credit amount on your return.
How the Marketplace Estimates Your Premium Tax Credit
The Marketplace will use the information you provide to them about your family and household income to estimate to credit amount you can claim on your tax return. You can use that estimate to decide if you want to have all, some, or none of your credit to be paid directly to your insurance company in advance so the credit can be applied to your monthly premiums.
If you want to have some or all of your credit paid in advance, you will be required to report on your tax return the difference between the amount of advance payments that the government sent on your behalf and the premium tax credit that you may claim based on your family size and household income.
However, if you do not want to have any of your credit paid in advance, you can claim the entire credit on your tax return, which will either increase your refund or lower the amount of taxes you owe.
How the Affordable Care Act Determines Your Premium Tax Credit Amount
The Affordable Care Act (AKA Obamacare) bases your credit amount on an income scale. Households and individuals with lower incomes get a larger credit, while those with higher incomes receive a smaller credit.
Since the premium tax credit is also refundable, you will receive the difference of the credit amount and your tax liability if your credit amount is more than your tax liability. If you don't owe any taxes, you can get the full amount of the credit as a refund. However, if you receive advance payments of the credit, you will need to reconcile the payment with the actual premium tax credit amount (which is calculated on your tax return).
If the credit on your return is less than your advance credit payments, the difference of the two values will either be added to your balance due or subtracted from your refund. However, if the credit is more than your advance credit payments, the difference will subtracted from your balance due or added to your refund.
How to Know What to Report on Your Tax Return If You Get Insurance Through the Marketplace
The Marketplace will send you Form 1095-A, Health Insurance Marketplace Statement, showing your premium amounts and your advance credit payments by January 31 of the year following the year of coverage. For the 2018 Tax Year, you should receive your 2018 coverage statement by January 31, 2019. You can use the information from the statement to calculate your premium tax credit on your 2018 tax return, as well as reconcile the advance credit payments made on your behalf with the actual premium tax credit amount.
What to Do If Something in Your Income or Family Situation Changes
You will need to report any changes to the Marketplace to make sure you get the correct advance payment amount. Report any life-changing events to the Marketplace, including:
- Marriage or divorce
- Changes in individual or household income
- Changes in physical address
- Birth or adoption
- Losing or gaining health care coverage or eligibility
- Incarceration or release from incarceration
- Other changes affecting household size and income
Please be aware that these changes may allow you to apply for insurance through the Marketplace during its special enrollment period that permits health care plan changes after the original enrollment deadline. Generally, the special enrollment period is open for 60 days from the date of the life event.
For Tax Year 2018 (coverage in 2019), the deadline to report changes to the Marketplace is February 15, 2019.
Do You Have to File a Tax Return to Claim Your Heath Care Credit?
Yes, the IRS requires you to file a tax return so you can continue qualifying for advance tax payments on your health insurance from the Marketplace. You can prepare and efile your tax return on efile.com. If you had income during the Tax Year, enter the income that corresponds with your income records. If you have no income during the Tax Year, enter $1.00 as your income in the efile.com income section.
For further assistance, contact efile.com support and we'll help you file your return so you can fulfill the IRS requirement and claim advance tax payments.
More Tax Information on Health & Medical Expenses