Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments

• Advance Payments of the Premium Tax Credit
• Filing a Federal Tax Return to Claim and Reconcile the Credit
• Failing to file your tax return may prevent future advance credit payments
• Reporting Changes in Circumstances
• How Advance Credit Payments Affect Your Refund
• Repaying Excess Advance Credit Payments

Advance Payments of the Premium Tax Credit

When you enroll in coverage, the Marketplace will estimate the amount of the premium tax credit you will be allowed for the year of coverage. To make this estimate, the Marketplace uses information you provide, including information about:

• Your family composition
• Your household income
• Whether those that you are enrolling are eligible for other non-Marketplace coverage

Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf. These payments – which are called advance payments of the premium tax credit or advance credit payments – lower what you pay out-of-pocket for your monthly premiums. 

If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

Filing a Federal Tax Return to Claim and Reconcile the Credit

If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments with the amount of the actual premium tax credit you are allowed. You must file an income tax return for this purpose even if you are not otherwise required to do so.

If you choose not to get advance credit payments, you can claim the full amount of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax you owe.

When you file, you will use Form 8962, Premium Tax Credit (PTC) to reconcile the amount of advance credit payments with the amount of your actual premium tax credit.

You must file if:

• You are claiming the premium tax credit.
• Advance credit payments were paid to your health insurer for you or someone else in your tax family. For purposes of the premium tax credit, your tax family is every individual you claim on your tax return – yourself, your spouse if filing jointly, and your dependents.
• You told the Marketplace that you would claim an exemption for someone on your tax return who was benefitting from advance credit payments, however, no one ended up claiming that individual.

For Information about how to fill out this form, see the instructions for Form 8962. See Publication 974 for additional instructions for taxpayers in special situations.

Failing to file your tax return may prevent future advance credit payments

If advance credit payments are made for you or an individual in your tax family, and you do not file a tax return, you will not be eligible for advance credit payments in future years. This means you will be responsible for the full cost of your monthly premiums. In addition, you may have to pay back some or all of the advance credit payments that are made on behalf of you or an individual in your tax family.

Advance payments of the premium tax credit are reviewed in the fall by the Health Insurance Marketplace for the next calendar year as part of their annual enrollment process.

Reporting Changes in Circumstances

If you purchased health insurance coverage through the Marketplace and benefit from advance payments of the premium tax credit, it is important to report certain life events to the Marketplace throughout the year – these events are known as changes in circumstances.  

If your household income goes up or the size of your household is smaller than you reported to the Marketplace - for example, because a son or daughter you thought would be your dependent will not be your dependent for the year of coverage - your advance credit payments may be more than the premium tax credit you are allowed for the year.  If you report the change, the Marketplace can lower the amount of your advance credit payments.  If you don’t report the change and your advance credit payments are more than the premium tax credit you are allowed, you have to reduce your refund or increase the amount of tax you owe by all or a portion of the difference when you file your federal tax return next year.

If your household income goes down or you gain a household member, you could qualify for more advance credit payments than are now being paid for you. This could lower what you pay in monthly premiums. In addition, reporting your lower household income or new family member could reveal that you qualify for Medicaid or CHIP coverage that is less costly than your Marketplace plan.

Changes in circumstances that can affect the amount of your actual premium tax credit include:

• Increases or decreases in your household income. Events that could result in a significant increase to household income include:
  • Lump sum payments of Social Security benefits, including Social Security Disability Insurance
  • Lump sum taxable distributions from an individual retirement account or other retirement arrangement
  • Debt forgiveness or cancellation, such as the cancellation of credit card debt
• Marriage or divorce
• Birth or adoption of a child
• Other changes affecting the composition of your tax family which includes you, your spouse if filing jointly, and your dependents
• Gaining or losing eligibility for government sponsored or employer sponsored health care coverage
• Moving to a different address

For the full list of changes you should report, visit HealthCare.gov.

To estimate the effect that changes in your circumstances may have on the amount of premium tax credit that you can claim - see the  Premium Tax Credit Change Estimator. 

How Advance Credit Payments Affect Your Refund

If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.

If the advance credit payments are more than the amount of the premium tax credit you are allowed, called excess advance credit payments, you will add all – or a portion of – the excess advance credit payments to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return. This will result in either a smaller refund or a larger balance due.

Repaying Excess Advance Credit Payments

The amount of your excess advance credit payments that that increases your tax liability may be limited if your household income is less than 400 percent of the applicable federal poverty line. On the other hand, if your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the excess advance credit payments.

If your filing status is Married Filing Separately, the repayment limitation above applies to both spouses separately based on the household income reported on each return.

The Marketplace will send you a Health Insurance Marketplace statement, Form 1095-A, by January 31 of the year following the year of coverage. This form shows the amount of the premiums for your and your family’s health care plans. This form also includes other information – such as advance credit payments made on your behalf – that you will need to compute your premium tax credit. For more information about Form 1095-A see Health Insurance Marketplace Statements.

If you also receive Form 1095-B or 1095-C, which are unrelated to the Marketplace, see our questions and answers for information about how these forms affect your tax return.

Remember to consider e-filing your tax return, because using tax preparation software is the best way to file a complete and accurate tax return.