If you had a policy through the Affordable Care Act Marketplace in 2023, you will need to file a federal tax return to revoke your prepaid premium tax credit without any excuse. warns analysts.
Prepaid Premium Tax Credit (APTC), or premium subsidy, is a portion of monthly premiums that the government pays insurance companies in advance to reduce insurance costs. You don’t have to claim the tax credit at the end of the year, but you do need to submit it so the government can match what you paid to what you’re entitled to. APTC is based on your expected income at the time of enrollment.
If your actual income for the year doesn’t match that estimate, you could end up paying money or getting a refund for the difference.
“If the prepayment is more than you should receive, you will have to pay back the difference,” said Louise Norris, a health policy analyst at healthinsurance.org, a consumer health information provider. “If you don’t get the amount you should have received, the IRS will refund you the difference.”
How do I know if I qualify for the premium tax credit?
You can qualify if you sign up for a Marketplace health plan and your household income for the year is at least 100% of the federal poverty line based on your family size. Also, if you are married, you cannot file separately or as a dependent. the IRS said.
How many Americans receive a prepaid premium tax credit?
Nearly 16.4 million Americans selected a Marketplace plan during the 2023 open enrollment period, and 90% received APTC. According to CMS data.
Do prepaid tax credits need to be repaid?
Generally, if you receive more premium tax credits in advance than you owe based on your final income at the end of the year, you must repay the excess when you file your federal tax return.
In 2021, approximately 7.8 million Americans received APTC. IRS data show. More than 2.6 million people had to write a check to the IRS for the difference, while more than 4.3 million people either overpaid and owed a refund or got back on par.
If your household income is less than 400% of the federal poverty level, the amount you must repay is limited. There is no cap on the amount you must repay, even if your income exceeds 400% of the poverty level, Norris said.
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What are 1095-A and Form 8692?
Each year, the Marketplace generates a “Health Insurance Marketplace Statement” or 1095-A that you can use when filing your tax return. The marketplace will also send a copy to his IRS.
Use the information about 1095-A to complete the following tasks: IRS Form 8962 To determine whether or not a refund is owed to you. This form must be attached to your tax return.
How can I avoid repaying the insurance premium tax credit?
Keep your income up to date with your Marketplace account throughout the year.
“Marketplaces can modify payments in real time,” Norris said. “If you were expecting to make $40,000 for the year, but your hours increase and you find out you’ll make $60,000, log in to your Marketplace account and see your income for the rest of the year. We recommend that you change your income so that the subsidy is adjusted so you don’t have to pay back as much.
The reverse also works. Reporting a decrease in income will increase your monthly subsidy and reduce your out-of-pocket costs instead of waiting for a tax refund.
Also, if you have any questions, please be sure to report them. life changes This is because things like childbirth and divorce can affect estimated household income, family structure, and credit amounts.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Contact [email protected]. Subscribe to the free Daily Money newsletter Get personal finance tips and business news every Monday through Friday.
