How to Calculate Health Insurance Premium Tax Credit?
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If you’re one of the millions of Americans who is health insurance premium tax credit eligible, you may be wondering how to calculate your credit. The premium tax credit is a refundable tax credit that helps eligible individuals and families cover the cost of health insurance premiums. If you qualify for the premium tax credit, you can choose to have some or all of your credit paid in advance to your health insurance company to lower your monthly health insurance bill, or you can claim the credit when you file
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The health insurance premium tax credit is a subsidy that helps eligible individuals and families pay for health insurance. The premium tax credit is available to people who enroll in a qualifying health insurance plan through the Marketplace.
To be eligible for the premium tax credit, you must meet certain requirements, including having household income within a certain range and not being eligible for other forms of health coverage, such as Medicare or Medicaid.
When you enroll in a qualifying health insurance plan through the Marketplace, you’ll estimate your annual household income for the year. Based on that estimate, the Marketplace will tell you how much of a premium tax credit you’re eligible for.
You can choose to have all or part of your premium tax credit paid in advance to your insurance company to lower your monthly health insurance bill. Or, you can wait to get the premium tax credit when you file your taxes for the year.
If your actual income turns out to be different than what you estimated when you applied for coverage, that may affect the amount of premium tax credit you’re able to get. You’ll reconcile any differences when you file your taxes for the year.
If you are one of the millions of Americans who are required to have health insurance under the Affordable Care Act (ACA), you may be eligible for a subsidy to help pay for it. This subsidy is called the health insurance premium tax credit, and it can save you a lot of money on your monthly premiums. But how do you calculate it?
Enter your family size
The first step in calculating your premium tax credit is to determine your family size. You’ll include yourself, your spouse (if you have one), and any unmarried children under age 21 who live with you and who are not your tax dependents. You’ll also include any other people who live with you and who would be claimed as dependents on your tax return if you filed one, even if they don’t actually qualify as your dependents for tax purposes.
For example, let’s say you’re single and have two children under age 21 who live with you. Your family size would be three.
Enter your income
Your income is one of the biggest factors in figuring out your health insurance premium tax credit.
If you’re married and file a joint return, you and your spouse’s incomes are counted together. If you’re claiming the premium tax credit for someone else, like a child or other relative, you’ll need to include their income as well.
You’ll need to estimate your income for the year when you’re figuring out how much premium tax credit you can get. If your income turns out to be higher or lower than you estimated, you’ll need to reconciled the difference when you file your taxes.
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. This will help ensure you get the right amount of premium tax credit each month and avoid getting too much or too little when you file your taxes.
Here’s what to do if your income or family size changes:
If your income goes down:
You may be eligible for a larger premium tax credit. Update your information with the Marketplace as soon as possible so you can get the extra help with your monthly payments.
If your income goes up:
You may no longer qualify for a premium tax credit, or you may qualify for a smaller premium tax credit. You’ll want to update your information with the Marketplace so you don’t get too much premium tax credit when you file your taxes. If you do not update your Marketplace information, you may have to pay back some or all of the premium tax credit when you file your taxes.
If your family size goes up:
You may be eligible for a larger premium tax credit. Update your information with the Marketplace as soon as possible so you can get the extra help with your monthly payments.
The health insurance premium tax credit is a refundable tax credit that helps eligible individuals and families cover the cost of health insurance premiums.
To claim the credit, you must file a federal income tax return and complete Form 8962, Premium Tax Credit.
When you complete Form 8962, you must reconcile any advance payments of the premium tax credit that were paid directly to your insurance company with the premium tax credit you’re allowed to claim on your return.
If you received advance payments of the premium tax credit, you’ll report them in Part III of Form 8962. You’ll also need to complete Part IV of Form 8962 to calculate your premium tax credit for the taxable year.
