What's the Advance Premium Tax Credit and How Does It Work?
Because of the Affordable Care Act, many people who buy their own health insurance can get financial assistance that lowers their costs. This assistance is called a subsidy. There are two kinds of health insurance subsidies: the advance premium tax credit and cost sharing reduction.
The advance premium tax credit goes toward your health insurance premium — what you pay each month to maintain your health coverage.
You can apply the tax credit to Blue Cross Blue Shield of Michgan's bronze, silver, gold and catastrophic plans. Here's what else you need to know about how the advance premium tax credit works.
If you can answer yes to all these questions, you may be eligible for the premium tax credit.
Not everyone with an income under 400% of the Federal Poverty Level will qualify for a premium tax credit. That's because it's based on your income relative to:
Here's an example. Two couples living in the same county both have an income that is 375% above the Federal Poverty Level. One couple is in their 30s, the other couple is in their 50s. Because older people pay higher premiums, the older couple may qualify for a tax credit. The younger couple may not, even though their income is the same.
To get your tax credit, you'll first need to fill out an application on the Health Insurance Marketplace. Then you'll get an estimate of the amount of credit you can claim for the coming year. The amount of credit you can get is based on:
The larger your family and the lower your income, the more credit you may be eligible for.
Then, you'll decide how to use your credit. This subsidy is called the advance premium tax credit because you can choose to have all or some of it paid in advance toward your premium.
The Marketplace notifies your insurance company about your credit, and reimburses them. Your insurance company applies the credit to your premium each month, so your payments are lower.
You can also wait to claim your credit when you file your tax return for the year you were covered by your plan. If you only applied part of it to your premium, you can claim the unused portion when you file, too. It's the difference between getting the credit as a lump sum, or paying less in premiums each month. It's up to you.
Because it's based on your family size and income, your advance premium tax credit changes as your life changes during a year. Events that affect the amount include:
Did you choose to have some or all of your credit applied in advance to your monthly premium? You should notify the Health Insurance Marketplace about any of these changes. They'll update the information first used to determine your premium tax credit. Then they'll adjust your advance payment amount.
This will be important when do your federal tax return.
You'll need to file a federal income tax return if:
You'll get a 1095 form from the Health Insurance Marketplace. It'll show the amount of your premiums and advance credit payments made.
You'll use this to see if there are any differences between:
If the premium tax credit amount on your return is less than your advance credit payments, the difference will be subtracted from your refund or added to your balance due.
If the premium tax credit amount on your return is more than your advance credit payments, the difference will be added to your refund or subtracted from your balance due.
Whether you take advance payments or wait to claim your credit, this subsidy is a refundable credit. That means if the amount of your credit is more than what you owe in taxes, you'll receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund.
If you can answer yes to all these questions, you may be eligible for the premium tax credit.
Not everyone with an income under 400% of the Federal Poverty Level will qualify for a premium tax credit. That's because it's based on your income relative to:
Here's an example. Two couples living in the same county both have an income that is 375% above the Federal Poverty Level. One couple is in their 30s, the other couple is in their 50s. Because older people pay higher premiums, the older couple may qualify for a tax credit. The younger couple may not, even though their income is the same.
To get your tax credit, you'll first need to fill out an application on the Health Insurance Marketplace. Then you'll get an estimate of the amount of credit you can claim for the coming year. The amount of credit you can get is based on:
The larger your family and the lower your income, the more credit you may be eligible for.
Then, you'll decide how to use your credit. This subsidy is called the advance premium tax credit because you can choose to have all or some of it paid in advance toward your premium.
The Marketplace notifies your insurance company about your credit, and reimburses them. Your insurance company applies the credit to your premium each month, so your payments are lower.
You can also wait to claim your credit when you file your tax return for the year you were covered by your plan. If you only applied part of it to your premium, you can claim the unused portion when you file, too. It's the difference between getting the credit as a lump sum, or paying less in premiums each month. It's up to you.
Because it's based on your family size and income, your advance premium tax credit changes as your life changes during a year. Events that affect the amount include:
Did you choose to have some or all of your credit applied in advance to your monthly premium? You should notify the Health Insurance Marketplace about any of these changes. They'll update the information first used to determine your premium tax credit. Then they'll adjust your advance payment amount.
This will be important when do your federal tax return.
You'll need to file a federal income tax return if:
You'll get a 1095 form from the Health Insurance Marketplace. It'll show the amount of your premiums and advance credit payments made.
You'll use this to see if there are any differences between:
If the premium tax credit amount on your return is less than your advance credit payments, the difference will be subtracted from your refund or added to your balance due.
If the premium tax credit amount on your return is more than your advance credit payments, the difference will be added to your refund or subtracted from your balance due.
Whether you take advance payments or wait to claim your credit, this subsidy is a refundable credit. That means if the amount of your credit is more than what you owe in taxes, you'll receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund.