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