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Premium Tax Credit Form 8962

Taxes and Health

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Attention: As part of the American Rescue Plan Act or Stimulus Three bill passed in March of 2021, there have been some changes to the Premium Tax Credit confirmed by the IRS on April 9, 2021. If you claimed an advance payment of the Premium Tax Credit during 2020, you do not have to report an excess of this advance payment on your 2020 return. In other words, you do not have to repay the Advance Premiums Tax Credit, or APTC, that you claimed during 2020 if you claimed too much. The net Premium Tax Credit (PTC) is unaffected.

How does this change affect you? If you have filed a 2020 return prior to this bill being implemented and you repaid your excess APTC, you do not have to file a tax amendment. The IRS is going to reduce this value to 0 and no further action will be required by the taxpayer. If you did in fact pay this advance payment back, the IRS will refund or reimburse this. There is no need to file an amendment solely for these changes.

If you are preparing your return now on eFile.com, we have implemented this into our system and it will all be calculated for you. You do not have to report your advance payment; the IRS will not owe you a refund after filing as it will be included in your 2020 tax return. Sign up and start your 2020 return so you do not have to worry about accounting for this.

If you are a taxpayer who received an IRS notice reporting that the Form 8962 is missing, you can disregard this if you are part of those who had excess APTC for 2020.

The above information is only for 2020 returns. Details regarding 2021 changes below.

2020 2021
Premium Tax
Credit

Health Insurance and the Premium Tax Credit

You will not pay a penalty on your 2020 return if you did not have health insurance in 2020. You are no longer required to report your health insurance on your return UNLESS you or a family member were enrolled in health insurance through the Marketplace and advance payments of the Premium Tax Credit were made to your insurance company to reduce your monthly premium payment.

  • Will you qualify for the Premium Tax Credit?
  • Marketplace: Sign up for a plan or if you and/or family member(s) obtained health insurance through the Health Insurance Marketplace (or the Exchange) at HealthCare.gov. and if advance payments of the premium tax credit were made to your insurance company to reduce your monthly premium payment, then the eFile tax app will include Form 8962 to your return. In that case, the marketplace is required to provide you Form 1095-A by January 31, 2021. Keep 1095-A for your records. Attention: disregard this for 2020. This information is for previous year returns and will likely return for 2021 returns in 2022.
  • Employer: If you were an employee in 2020 and you received health insurance through said employer, the employer(s) will provide Form 1095-C by early March, 2021 - however, you don't have to wait until then to file your return as you might get your information in a different way from your employer. This form will report whether they offered you health insurance coverage; if they did, information will be shown about that. Information on 1095-C might be relevant if you had to purchase health insurance via the marketplace - see above. If you do wish to claim the premium tax credit, you will need Part II of Form 1095-C.

This page specifically covers Form 8962, which is used for the Premium Tax Credit (PTC). The PTC is a refundable tax credit that can be claimed by eligible persons and families with low to moderate incomes (between 100% and 400% of the federal poverty line) to help individuals afford health insurance purchased through the Health Insurance Marketplace (or the Exchange) at HealthCare.gov.

Again, when you prepare and efile your tax return on eFile.com, we will calculate and report your Premium Tax Credit amount on your tax return, as well as reconcile the advance credit payments made on your behalf with the actual premium tax credit amount. 

At eFile.com, we cover all the healthcare tax forms in the following pages: 

  1. Form 1095-A-Health Insurance Marketplace Statement
  2. Form 1095-B-Health Coverage
  3. Form 1095-C-Employer-Provided Health Insurance Offer and Coverage
  4. Form 8962-Premium Tax Credit (this page)

2021 Premium Tax Credit

As part of the American Rescue Plan Act or third stimulus package, marketplace healthcare premiums have become more affordable. The bill makes the credit more accessible as well as increases the amount - these increases are set to last through 2022. In general, individuals will receive the credit so that their healthcare premium is no more than 8.5% of their household income. The changes also mean that those who are not within 400% of the federal poverty level (FPL) may qualify for some of the credit. For the most part, people enrolling in a new healthcare plan will see an overall lower premium.

If you are already enrolled in a plan and have not done so already, re-submit your application for healthcare to see for these changes. Otherwise, you may expect to see these credits when you file your 2021 tax return. Also, if you receive unemployment compensation, you may see additional benefits or credits when applying for a plan. 

Premium Tax Credit Qualifications

You can qualify for the credit if you meet all of the following requirements:

  • 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 not affordable or fails to provide minimum value.

Income Values Under the Federal Poverty Line

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. Below, the lesser number is the Federal Poverty Line or FPL. Any amount over is within a certain percentage of the FPL which affects the mount of the Premium Tax Credit. 

Below are the 2020 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 2020 tax return, but know that eFile.com will determine this for you: 

  • $12,760 - $51,040 for one individual
  • $17,240 - $68,960 for a family of two
  • $21,720 - $86,880 for a family of three
  • $26,200 - $104,800 for a family of four
  • $30,680 - $122,720 for a family of five
  • $35,160 - $140,640 for a family of six
  • $39,640 - $158,560 for a family of seven
  • $44,120 - $176,480 for a family of eight

Note: For larger families, the federal poverty minimum level increases by $4,480 per household member. 

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 levels.

For the purposes of qualifying for the Premium Tax Credit, it is your Modified Adjusted Gross Income (or MAGI) plus the Adjusted Gross Income or AGI of every other individual in your family who is required to file a tax return. Modified AGI is your AGI plus any excluded foreign income, 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).

Married Filing Separately 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
  • Pays for over half the cost of the household during the year.

Premium Tax Credit Estimates

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.

Premium Tax Credit Amount

The Affordable Care Act 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 by eFile.com 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 be subtracted from your balance due or added to your refund.

Reporting the Premium Tax Credit

You can 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.

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 2020 Tax Year, you should receive your 2020 coverage statement by January 31, 2021. You can use the information from the statement to enter it into your eFile.com account and your Premium Tax Credit will be calculated for you on your 2020 tax return. The advance credit payments made on your behalf will be reconciled with the actual premium tax credit amount. Note: this does not apply due to recent, temporary law changes (see the top of this page).

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 2020 (and health care coverage in 2020), you should be reporting any income and household changes to the Marketplace all year 2020 for your 2020 return and all year 2021 for your 2021 return.

How to Claim the Premium Tax Credit

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. In order to do this, you will need to add the information from your Form 1095-A into your eFile.com account. This is done in the Healthcare section of your account. After you complete your return, we will generate Form 8962 for you based on the information you have entered from your Form 1095-A. The 8962 form will be e-filed along with your completed tax return to the IRS.

If you did not e-file your return with the Form 8962 for the Premium Tax Credit, the IRS might send you a letter asking for this information. If you have already e-filed your return on eFile.com, you can simply return to your account, add the information from your 1095-A, regenerate your return, and print and mail the Form 8962 to the IRS. Note: see the top of this page for temporary changes to this.

For further assistance with the Premium Tax Credit, contact us at eFile.com and we will help you file your return so you can fulfill the IRS requirement and claim the advance tax payments.

More Information on Health Insurance and Taxes

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