Next Step Tax & Accounting
  • Clients
    • Portal - Log In
    • Portal - Instructions

Blog

How does the advance premium tax credit work?

5/21/2020

0 Comments

 
Picture
The Advance Premium Tax Credit can lower your monthly health insurance payment. It came into being in 2010 when President Obama signed into law the Patient Protection and Affordable Care Act (also known as "the ACA" or  "Obamacare"). One of the provisions of the ACA was the Premium Tax Credit.

The credit reduces your premium when applying for coverage through the Health Insurance Marketplace, at healthcare.gov. But how does it work?
​To receive the Premium Tax Credit you must apply for coverage through the Health Insurance Marketplace. ​When you do, you estimate your expected income for the year. Based on your estimated information a calculation is done to determine if you qualify for a premium tax credit. The higher your income, the less of a credit you'll qualify for. The lower your income, the more of a credit you'll be able to receive.

The Premium Tax Credit is calculated as an annual total, but is divided by 12 to determine how much per month you'll be able to use to offset insurance premiums. ​If you qualify, you can choose to use any amount of the credit, in advance, to lower your monthly payment. Because it is an annual credit that you are receiving monthly in advance of filing your tax return, the monthly reductions to your health insurance payments are called the Advance Premium Tax Credit.

At the end of the year you'll receive From 1095-A, Health Insurance Marketplace Statement. Along with other information, it shows the full cost of your premiums and the amount of the credit you received. This information is used to complete Form 8962, Premium Tax Credit, which is submitted with your tax return.

Form 8962 takes information about your actual income to calculate the amount of the credit you should have received. The credit you qualify for (based on your actual income) is reconciled against the credit you claimed (based on your estimated income). 
  • If at the end of the year you’ve taken more premium tax credit in advance than you’re due, you’ll have to pay back the excess when you file your federal tax return.
  • If you’ve taken less than you qualify for, you’ll get the difference back.

The Advance Premium Tax Credit is a great way to offset the rising cost of healthcare. Let us know if you have questions. 
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Next Step Blog

    Our blog is intended as a tool to keep people informed about relevant tax and accounting issues. If you have a question or an idea for a post, let us know!

    Categories

    All
    Audits
    Capital Assets
    Deductions
    Due Dates
    Education
    Employees
    Fraud & Scams
    Income
    Insurance
    IRS Code
    Management
    New Legislation
    Payroll
    Planning
    Refunds & Payments
    Sales Tax
    Tax Deferral
    Tax Forms

    Archives

    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016

    RSS Feed

Copyright © 2023
Picture
  • Clients
    • Portal - Log In
    • Portal - Instructions