Analysts caution that if you purchased insurance through the Affordable Care Act marketplace in 2023, you will need to submit a federal tax return in order to get your advance premium tax credit, if for no other reason.
Analysts caution that if you purchased insurance through the Affordable Care Act marketplace in 2023, you will need to submit a federal tax return in order to get your advance premium tax credit, if for no other reason. (Photo : by Paul Morigi/Getty Images for Protect Our Care)
The percentage of the monthly payment that the government pays in advance to the insurer to assist cut your insurance costs is known as the premium subsidy, or advance premium tax credit (APTC). While you don't have to file to reconcile what the government paid and what you're entitled to, you do need to claim the credit on your taxes at the end of the year. Your estimated income at the time of enrollment is the basis for APTC.
You can owe money or receive a refund for the difference if your actual income for the year differed from that estimate.
Do You Qualify?
You could be eligible to enroll in a Marketplace health plan if your annual household income is at least 100% of the federal poverty threshold for your family size. Among other restrictions, the IRS stated that you cannot be married and file separately or claim someone else as a dependant.
Generally speaking, when you submit your federal tax return, you will be required to reimburse any excess premium tax credit that you took at the end of the year over what your final income would have required.
According to IRS data, around 7.8 million Americans earned APTC in 2021. While over 4.3 million persons either came out even or overpaid and were due a refund, over 2.6 million had to pay a check to the IRS for the difference.
You won't be required to repay as much if your family income is less than 400% of the federal poverty threshold. The amount you are required to return does not stop out at 400% of the poverty line.
Tips for Managing Premium Tax Credit Repayments
To avoid paying back your premium tax credit, it's crucial to keep your income updated throughout the year in your Marketplace account. According to expert advice from Norris, if your income projections change-for example, if you anticipate earning more or less than initially projected-it's wise to log into your Marketplace account and adjust your income accordingly. By doing so, your subsidy can be recalculated in real time, helping to prevent a situation where you owe a significant amount when filing your taxes.
Additionally, it's essential to report any life changes promptly, such as having a baby or getting a divorce. These events can impact your estimated household income, family size, and credit amount, potentially affecting your eligibility for the premium tax credit. By staying proactive and keeping your information up-to-date, you can ensure that you receive the appropriate subsidy and minimize the risk of owing money at tax time.
