Determine if you are eligible to claim the Premium Tax Credit (PTC)
To be allowed PTC for a taxable year, you must meet 1 and 2 below:
- For one or more months during the year, you or a family member (spouse or dependent) must
You must be an applicable taxpayer, which is someone who:
- enroll in a qualified health plan through the Marketplace;
- Not be eligible for coverage through an employer plan or government sponsored coverage; and
- Must pay qualified health plan premiums by the due date (either by paying directly, or through advance credit payments).
- Has household income between 100 and 400 percent of the federal poverty line (FPL) for your family size (there are exceptions for certain taxpayers below 100 percent of the FPL – see IRS Publication 5187, Affordable Care Act: What You and Your Family Need to Know, for details).
- Married, filing a joint tax return, unless you meet criteria that allow certain victims of domestic abuse and spousal abandonment to claim a PTC using the married filing separately fling status. See Instructions for Form 8962 for more information.
- Cannot be claimed as a dependent by another person.
Decide if you want to receive advance payments of the Premium Tax Credit or get all of the credit when you file your return
If you enroll in coverage through a Marketplace and request financial assistance, the Marketplace will calculate your estimated premium tax credit, using an estimate of all of your household income and other information such as your address, your family size, and who in your family can enroll in non-Marketplace insurance.
At that point, you can choose advance payments of the PTC – where all or part of the estimated premium tax credit is paid to your insurance company, which reduces your monthly premiums — or you can choose to pay all of the premiums, and get all of the benefit of the PTC when you file your tax return, as explained below.
Advance Payments of the Premium Tax Credit
If you choose advance payments of the premium tax credit (APTC), the Marketplace pays your estimated credit directly to your insurer for you, reducing your monthly premium.
When you file your tax return at the end of the year, you’ll compare the amount of your estimated PTC the Marketplace paid out for the year to the amount of PTC you are allowed. The PTC you’re allowed is based on your actual household income, family size, address, and who in your family is eligible to enroll in non-Marketplace coverage. You'll enter these amounts on IRS Form 8962, Premium Tax Credit (PTC), which you file with your tax return. If there is a difference, your tax bill or refund may change.
This end-of-year reconciliation of the advanced premium tax credit and the actual credit is why it is important for you to promptly report any changes in circumstance to your Marketplace (see the How will this affect me? section, below).
Premium Tax Credit on Your Tax Return
If you choose to forego advanced payments, you'll get all of the benefit of the PTC when you file your tax return. In that case, your entire credit will either reduce the tax you owe or result in or add to a refund.
You may want to forego advanced payments, if you can pay your full monthly premium and your income varies widely during the year or you expect to receive some sort of large lump sum payment later in the tax year. This would keep you from having to contact the Marketplace to recalculate your advance credit during the year or possibly repay advanced amounts.
File a tax return
If you receive the premium tax credit, you must file a tax return, even if you are not otherwise required to file.
You should wait to file your tax return until after you receive a Health Insurance Marketplace Statement (IRS Form 1095-A) in the mail – probably in early February. It will come from your marketplace, not from the IRS.
If you do not receive the IRS Form 1095-A or the information on it is incorrect, you must contact your marketplace. If you don’t have that contact information, it is available on IRS.gov.
The form will have all the information you need to file IRS Form 8962, Premium Tax Credit (PTC), including the amount of any advance payments of the premium tax credit that were paid to your health plan during the tax year. You'll need to complete IRS Form 8962 and file it with your regular tax return.
Note: Form 8962 can calso be claimed on the new IRS form 1040 SR, U.S. Tax Return for Seniors, for taxpayers age 65 and older.