What is the Premium Tax Credit?

The Premium Tax Credit (PTC) is a refundable tax credit that helps eligible individuals and families cover the premium payments for their health insurance.

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The Basics of the Premium Tax Credit

The Premium Tax Credit is a refundable tax credit that helps eligible individuals and families cover the cost of their health insurance premiums. If you qualify for the Premium Tax Credit, you can choose how to receive it. You can have it sent to your insurance company to lower your monthly premium payments, or you can receive it when you file your taxes.

What is the premium tax credit?

The premium tax credit is a refundable tax credit that helps eligible individuals and families cover the cost of health insurance premiums. The amount of the credit is based on the amount of financial need and the cost of health insurance premiums.

If you are eligible for the premium tax credit, you can choose to have some or all of the credit paid in advance to your health insurance company to help lower your monthly health insurance premiums. You can also choose to apply all or part of the credit to your tax bill when you file your taxes.

How does the premium tax credit work?

The amount of the premium tax credit is based on the cost of your health insurance plan and your income. If you have a lower income, you’ll get a larger tax credit. The premium tax credit can be paid in advance to your insurance company to lower your monthly health insurance bill. Or, you can choose to get the premium tax credit when you file your taxes for the year.

To figure out how much of the premium tax credit you’ll get in advance, you’ll need to estimate your income for the year. If you guessed wrong and your income turns out to be higher than you estimated, you’ll have to repay the excess when you file your taxes.

If your income is lower than you estimated, you may get a bigger refund when you file your taxes.

You can’t get more than the cost of the health insurance plan premium for which you’re eligible. For example, if the yearly premium for a particular health insurance plan is $5,000 but your family only receives $3,000 in financial assistance through the premium tax credit, then only $3,000 will be paid on behalf of your family in advance to lower their monthly premiums. The other $2,000 must be paid by another source (like by your family directly to their health insurance company).

Who is eligible for the premium tax credit?

The premium tax credit is a refundable tax credit that helps eligible individuals and families with low or moderate incomes afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange.

To be eligible for the premium tax credit, you must:
-Have household income within certain ranges (see below)
-Not be eligible for other forms of health coverage, such as Medicare, Medicaid, CHIP, or employer-sponsored insurance
-Purchase health insurance through the Health Insurance Marketplace

If you’re eligible for the premium tax credit, you can choose how to receive it. You can have it sent in advance to your insurance company to lower your monthly premium payments, or you can wait and receive it when you file your taxes.

Your household income must be at least 100 but no more than 400 percent of the federal poverty level (FPL) for the size of your family in order to qualify for the premium tax credit. For example, if your family consists of three people and your household income is $20,000 per year, then your household income would be at 133 percent of FPL and you would be eligible for the premium tax credit. The table below shows the 2017 FPL guidelines.

2017 Federal Poverty Level Guidelines
Percentage of Federal Poverty Level Household Income Limits* (for a family of three)
100% $20,420 per year or $1,701.67 per month
133% $27,060 per year or $2,255 per month
150% $30,180 per year or $2,515 per month
200% $40,240 per year or $3,353.33 per month
300% $60,360 per year or $5,030 per month
400% $80,480 per year or $6706.67per month

*Income limits are higher in Alaska and Hawaii

How to Claim the Premium Tax Credit

The Premium Tax Credit is a refundable tax credit available to eligible taxpayers who enroll in a qualified health plan through the Health Insurance Marketplace. If you’re eligible for the Premium Tax Credit, you can choose how much of the credit you want applied to your monthly premium. You can have all of it applied, or you can choose to have some of it applied and receive the rest in the form of a tax refund when you file your tax return.

How do I claim the premium tax credit?

If you are eligible for the premium tax credit, you can choose to have some or all of it paid in advance to your insurance company to lower your monthly health insurance bill. Or, you can wait to get the whole premium tax credit when you file your federal income taxes for the year.

If you choose to have the premium tax credit paid in advance, you will need to file a federal income tax return at the end of the year so the government can reconcile the amount of advance payments with the premium tax credit you’re actually entitled to based on your final income for the year.

If you do not choose to have advance payments of the premium tax credit paid directly to your insurance company, you will need to pay the entire premium for your health insurance yourself each month. When you file your federal income taxes for the year, you will then claim the premium tax credit on your return and get a refund for any premium tax credit that you were entitled to but did not receive in advance.

What if I have already filed my taxes?

If you have already filed your taxes for the year and did not claim the credit, you can file an amended return using form 1040-X. Be sure to include any supporting documentation, such as Form 8962. You generally have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later, to file a claim for credit or refund.

What if I’m not eligible for the premium tax credit?

If you’re not eligible for the premium tax credit, you can still purchase health insurance through the Marketplace. However, you won’t be able to receive any financial assistance to help lower your monthly premiums.

Other Things to Know About the Premium Tax Credit

The premium tax credit is a tax credit that helps eligible individuals and families cover the cost of their health insurance premiums. If you are eligible for the premium tax credit, you can choose to have some or all of the credit paid in advance to your insurance company to lower your monthly health insurance bill.

What if my income changes during the year?

If you experience a change in income or family size during the year, it’s important to update your information with the Marketplace. That way, you’ll get the correct amount of help paying for your health insurance. If you don’t update your information, you may have to pay back some of the tax credit when you file your federal tax return.

To make sure you get the right amount of tax credit, report changes in income or family size to the Marketplace as soon as possible. You can do this online, by mail, or by phone.

If your income goes down
If your income for the year is less than you estimated when you applied for coverage, you may get more help paying for your premiums. This means that when you file your federal tax return, you’ll get a refund instead of owing money to the IRS.

If your income goes up
If your income for the year is more than you estimated when you applied for coverage, you may get less help paying for your premiums than you expected. This means that when you file your federal tax return, you may owe money to the IRS.

If your family size goes up
If anyone is born, adopts a child, or moves in with you and becomes part of your household during the year (and wasn’t included in your original Marketplace application), report this change as soon as possible. You may qualify for a “special enrollment period” that will allow you to sign up or change plans outside of the open enrollment period. You may also get more help paying for coverage if adding someone to your household increases the size of your family.

What if I move during the year?

If you move to a new state during the year, you’ll need to contact the marketplace in your new state of residence to update your information. You may also need to update your information with the IRS.

If you move during the year and your new Marketplace plan’s premium is different from the amount of advance payments of the premium tax credit that you received, you’ll need to reconcile the difference when you file your taxes for the year.

You’ll still be able to claim the premium tax credit for any months you lived in a state that offers Marketplace coverage. However, if you live in a state that doesn’t offer Marketplace coverage, you won’t be able to claim the credit for those months.

What other tax credits can I claim?

Other tax credits that you may be eligible for include the following:
-The Health Coverage Tax Credit
-The Small Business Health Care Tax Credit
-The Child and Dependent Care Tax Credit
-The Earned Income Tax Credit

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