Affordable Care Act Advance Premium Tax Credit

The Affordable Care Act has made it possible for individuals and families throughout the United States to select and purchase their health insurance coverage from the federal health insurance marketplace or the marketplace offered by their state. Millions have taken advantage of the benefit, and if you are among them and receive an Advance Premium Tax Credit, it is important that you are fully aware of your reporting responsibilities. 

Advance Premium Tax Credit

The Advance Premium Tax Credit is a subsidy that the government provides for those who are low to moderate income – it provides help with the cost of insurance premiums based upon specific family circumstances and income, and that means that if things change, families need to report the changes to the government so that the credit can be adjusted accordingly.

There are several kinds of changes that can have an impact on the credit that your family receives – some may increase the amount of your subsidy and some may decrease it. Examples of changes in circumstances that need to be reported include:

  • A change (either an increase or a decrease) in income
  • A change in marital status (marriage or divorce)
  • Family size (birth or adoption of a child, death of a family member)
  • New employment that provides or offers access to health insurance
  • Changes in eligibility for health care coverage other than that provided by the marketplace
  • Moving

The sooner that you report changes in any of these circumstances, the easier you make it on yourself.  If it turns out that the change means that you are entitled to a larger subsidy, it means that you will receive your money faster, and if the change means that your subsidy is reduced, reporting it quickly will prevent you from owing the government too much money and having to give back a large amount at tax time.

If you want help determining what kind of change your new circumstances will have on your APTC, the IRS provides a convenient calculator that will help you estimate the impact. If it turns out that you have received too much premium assistance, the amount of excess that you will need to repay will depend upon your filing status and income, but generally falls between $300 and $2,500 unless it is determined that you made too much income to have qualified for the APTC in the first place. If that is the case there is a good chance that all of the premium subsides that were provided for your family will need to be repaid. The best way to avoid this circumstance, which can create a number of challenges, is to report changes in circumstance as soon as they happen.

Taxpayers who are married but who file separate income tax returns are ineligible for the premium tax credit, and if one is provided, the decision to file in that status will require full repayment.  Spouses who have been abused or abandoned may be eligible for an exception to this rule, and so may those who file as head of household.

The rules surrounding the advanced premium tax credit can be complex, and filing the appropriate paperwork in a timely manner is essential. For help with any of the Affordable Care Act tax provisions, contact our office.

If you have questions about how the Affordable Care Act affects your taxes, call us at 817-704-4050 to discuss your options.