Recently, the U.S. government has made some adjustments to the way health care coverage plans are administered to the people. One of these adjustments became feasible in 2014, the Premium Tax Credit.
There are dozens of tax credits out there, what makes Premium Tax Credit so important? Premium Tax Credit was established in early 2014 as part of the new Affordable Care Act and is designed to make health insurance more affordable. Premium Tax Credit is available through the Health Insurance Marketplace, which provides thousands of health insurance plans to people with low income.
What is Premium Tax Credit?
Basically, Premium Tax Credit is an amount of money given to your insurance company via the government in order to make paying for health insurance easier and more affordable.
How do I Receive the Premium Tax Credit?
The first step in receiving the Premium Tax Credit is to obtain a health insurance plan, preferably through the Health Insurance Marketplace (average enrollment period runs from November to February). Once you have selected a plan that works within your budget, Marketplace will check to see if you qualify.
Qualifications for Receiving the Premium Tax Credit
There are several qualifications you must meet in order to be eligible to receive this tax credit. To qualify, you will need the following:
- You must be within the average income range
- You should not be filed as a dependent
- Cannot file a Married Filing Separately form
- You should have applied for health insurance through Marketplace
- You should be unable to qualify for health insurance through work or other health insurance company
Upon confirmation that you are eligible for Premium Tax Credit, the Marketplace will display an amount of money that the government is willing to offer you. If you are satisfied with this tax credit, you move on to selecting how/when you want to receive these benefits.
What are the Options for Claiming My Tax Credit?
There are two ways in which you can claim your tax return amount.
Get It Now
The Get It Now option is designed to lower the monthly premiums that are required to pay, instantly. This means that the tax credit you received is transferred directly to your health insurance company – in increments or all at once – upon acceptance of the credit.
Get It Later
Get It Later option is designed to pay you back a fixed amount of money towards your health insurance expenses upon the completion of the tax return. This means that you pay your premiums and health insurance cost as expected and then receive your tax credit all at once when the tax return form is completed.
What Forms Do I Need to Fill Out?
Once you have chosen what option you want to engage in, you are required to fill out a couple of forms.
The first one is Form 8962, which is the Premium Tax Credit form. You will confirm that you have received a tax credit from the said insurance company as well as the amount of that credit. This form is to be completed along with your Tax Return form.
If you received a health coverage plan through the Marketplace, you will fill out Form 8962 with the information listed on Form 1095-A. Form 1095-A is the Health Insurance Marketplace Statement form that confirms all of your information.
* We strongly suggest that you speak with your CPA to ensure proper calculations.
There may be a time or two where you owe a fee to the government for late payment or unpaid bills. However, if you have received a premium tax credit, those fees are waivered if the reasoning behind your late payment relates to advance payments made by the government.
If you choose to have your Premium Tax Credit split up and given to your insurance company month by month to lower premium costs, and the payments don’t add up to the amount of credit you are entitled to, you receive a refund of the amount that was not credited to you. If you are unable to make a payment due to this unequal payment method, you do not need to pay any late fees.
You are required to let the IRS know about your circumstance by filling out Form 4868 before the required due date.
Record All Changes
During a tax year, if there are any changes to the information you provided the IRS with, you are required to make those changes as soon as possible through the Marketplace. These changes can affect the amount of Premium Tax Credit you are given so it is crucial that you keep the IRS updated.
Premium Tax Credit, although new to taxpayers, has influenced the lives of thousands of people and helped make health insurance much more affordable. By using the Health Insurance Marketplace, you are almost guaranteed a health plan that fits within your budget and the additional tax credit offered to you will make that price even lower.
Take a few minutes to see if you can receive a Premium Tax Credit and keep you and your family healthy for an affordable price.