15 Nov Premium Tax Credits Explained
Premium Tax Credits Explained
There are countless insurance plans on the marketplace with a variety of options, which can make choosing a plan confusing. We’ve sought to make choosing a plan easier for you with our three-part series. In this part, we’ll go over the Premium Tax Credit or PTC.
What Are Premium Tax Credits?
The premium tax credit is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace, also known as the Exchange, ACA, or Obamacare. The amount of the credit is based on your income and the cost of Marketplace health insurance plans in your area.
To get the tax credit, you must select a plan on the Health Insurance Marketplace, meet certain requirements, and file a tax return with Form 8962, Premium Tax Credit (PTC). In addition, you must not be eligible for public coverage—including Medicaid, the Children’s Health Insurance Program, Medicare, or military coverage—and must not have access to affordable health insurance through an employer.
There are two ways to collect the credit:
- You can pay the entire premium up front and collect the premium tax credit (PTC) as a lump sum when you file your tax return.
- You can receive an advanced premium tax credit (APTC) based on your estimated income for the upcoming year. If you choose to receive an APTC, each month the government will pay 1/12 of the credit directly to your insurance company, and the insurer will bill you for any remaining premium amount due.
How Do the Premium Tax Credits Work?
The Health Insurance Marketplace will determine the amount of Premium Tax Credit based on your expected income reported on healthcare.gov.
Keep in mind when using the advanced premium tax credit:
- If you use more APTC than you qualify for (based on your final yearly income), you must repay the difference when you file your federal income tax return.
- If you use less APTC than you qualify for, you’ll get the difference as a refundable credit when you file your taxes.
Who Is Eligible?
To qualify for the premium tax credit:
- You must buy your health insurance from the Health Insurance Marketplace.
- You must file a joint return with your spouse if you’re married.
- Your household income falls within a certain range.
- Your income must be above the range for Medicaid eligibility.
- You cannot be claimed as a dependent by anyone else.
- You must not be eligible for coverage through a government program, such as Medicare, Medicaid, CHIP or TRICARE.
- You must not be eligible for affordable coverage offered through your employer
- You cannot be receiving an Individual Coverage Health Reimbursement Arrangement form your employer.
The premium tax credit can help you afford health insurance for you and your family. To learn more about coverage available in Eastern Wisconsin from Common Ground Healthcare Cooperative, go to commongroundhealthcare.org or call 855.494.2667.