Affordable Care Act & The Premium Tax Credit

Will you have to pay?

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The Affordable Care Act requires most Americans to have health insurance.  If you need help paying for coverage, the Premium Tax Credit is a credit that allows you to lower your monthly premium based on household information provided to the Health Insurance Marketplace when purchasing the Bronze, Silver, Gold or Platinum level insurance.  

If you are:

• lawfully present in the United States, 
• unable to obtain health insurance through your employer or the government (Medicare, etc), 
• not claimed as a dependent, 
• not filing a married filing separate tax return
• and fall within the income threshold guidelines: $45,900 for an individual and $94,200 for a family

the PTC will be estimated for you by the Marketplace.  The PTC can be received in advance monthly to lower the health insurance premiums or claimed on the tax return.  Those who take the advanced credit will have to reconcile the credit received against the estimates reported when they applied.  It is important that enrollees report changes in household income, marital status and family size to the Marketplace.  Doing so will allow the Marketplace to update the information used to determine eligibility for a healthcare plan which may affect the amount of advanced payments/subsidies that are sent to the health insurer. 

If the household income is underestimated, the enrollee may receive a smaller tax refund or owe the Internal Revenue Service (IRS).  If the household income is overstated, the enrollee could have benefitted from reduced monthly health premiums.  

There is a large chance that a number of enrollees under or over estimated their household income because they applied in October 2013 prior to knowing what they would make in 2014.  In addition, the requirement to report changes such as:

• New job or raise in pay (increase in household income)
• Loss of job or reduction in pay (decrease in household income)
• Marriage or divorce
• Loss of a dependent
• Acquiring employment that offers health insurance (ineligible to receive marketplace health insurance)

may not be on the forefront of individuals' minds as they are going through these issues. Life changing events can create stress, excitement and other emotions which push the requirement to report lower on the list of to-dos. It is essential to keep the Marketplace abreast of these changes to avoid a shock at tax time.

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The marketplace should mail enrollees Form 1095-A (Health Insurance Marketplace Statement) by January 31st.  This form will list who had health insurance policies and how much of the advanced Premium Tax Credit was received.    

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The information on Form 1095-A will be used to fill out Form 8962 Premium Tax Credit (PTC). The PTC form will ask for information on insurance, advanced payments received and income. 

   

Form 8962 can be complicated to complete if the household members did not all have coverage the entire year.  

If you have questions, please seek the advice of a trained tax professional.

Google Images:  1.  www.foxnews.com, 2. www.savingadvice.com, 3. www.finance.yahoo.com

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This blog is not meant to offer legal or comprehensive advice.  You should consult a tax professional for questions regarding your unique situation.