Understanding the Advanced Premium Tax Credit: 3 Things to Know

Once your premium tax credit is determined, you can choose to take it as an advance, where it applies immediately to the health insurance premiums of the plan you’re selecting. But it’s important to know that you will be held accountable to that number when you next file for your income taxes.

A Form 8962 Filing Requirement
Advancing the payment requires you to file a Form 8962 to reconcile the amount of tax credit you received against what you actually earned that year. It will also compare with your previously estimated family dynamic, with how many you claim, and how you file. Not filing a federal tax return can translate to you owing for the full cost of the monthly premiums.

An Over-Projection Means Paying Back
If the credit you leveraged in advance for the previous year’s premiums is more than you are allowed based on actual income, you may have to pay some of those funds back. There are repayment caps limiting how much some households have to pay back, based on their income benchmarks to the poverty line. If your actual income for the year exceeds 400% of this poverty line, you will be responsible for paying back the full overage amount of the APTC above which you were entitled. It may be taken from a refund or submitted as a tax bill.

An Under-Projection Means a Bigger Tax Return
This year has been a financial challenge for many families. If your original projections were higher than what you actually collected for income this year, you might be entitled to a more substantial savings. The difference will be added to your tax refund or taken from any tax balance due you already have.

If you’re ready to file your taxes for the 2020 financial year, an accounting professional can help you review the forms you’ll need to collect from the Marketplace regarding your coverage and any tax credits you leveraged. And if you need to buy a new health insurance plan during a special enrollment period yet this year, browse with W3LL.

Answering a few short questions about your household will help you determine your eligibility and calculate tax credits for you. Our free services allow individuals and families to tap into the benefits of the advanced premium tax credit and understand how to best make estimates and projections. Visit today to learn more and find an affordable health insurance plan.