Premium Tax Credit

Updated on: Jun 26, 2018

The new tax law didn’t change the premium tax credit. However, there are inflationary adjustments to the cap on the repayment of any excess advance premium tax credit received. 

Previous (2017)

The premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums (payments) for their health insurance purchased through the Health Insurance Marketplace. To claim the credit, you must meet the following eligibility requirements:

 

  • Have household income that falls within a certain range. To be eligible for the premium tax credit, your household income must generally be at least 100 – but no more than 400 – percent of the federal poverty line for your family size.
  • Don’t file a tax return using the filing status of Married Filing Separately. There’s an exception to this rule that allows certain victims of domestic abuse and spousal abandonment.
  • Can’t be claimed as a dependent by another person.
  • Meet these additional requirements: In the same month, you or a family member:
    • Have health insurance coverage through a Health Insurance Marketplace.
    • Can’t get affordable coverage through an eligible employer-sponsored plan that provides minimum value.
    • Aren’t eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.
    • Aren’t enrolled in group coverage designated by HHS as minimum essential coverage such as health coverage offered by a college or university to its students.
    • Pay the share of premiums not covered by advance credit payments.

 

When you enroll, the Marketplace will determine if you’re eligible for advance payments of the premium tax credit, also called advance credit payments. Advance credit payments are amounts paid to your insurance company on your behalf to lower the out-of-pocket cost for your health insurance premiums.

 

If you get the benefit of advance credit payments in any amount – or if you plan to claim the premium tax credit – you must file a federal income tax return and attach IRS Form 8962, Premium Tax Credit, to your return. You claim the premium tax credit and reconcile the credit with the amount of your advance credit payments for the year on IRS Form 8962.

Change

The new tax law didn’t change the premium tax credit. However, there are inflationary adjustments to the cap on the repayment of any excess advance premium tax credit received. 

How will this affect me?

Scenario 1

Sidney and Nan are married and plan to file a joint tax return for tax year 2018. They were both enrolled in coverage through the Marketplace for all of 2018 and advance payments of the premium tax credit (APTC) were made for this coverage. They must file a 2018 tax return and attach IRS Form 8962, Premium Tax Credit, on which they will reconcile the amount of APTC received to the amount of the PTC to which they are entitled. If the amount of the PTC is less than the amount of the APTC, they must repay the difference on their 2018 tax return, subject to a repayment limit for taxpayers with household income below 400 percent of the federal poverty line for their family size. If their PTC is more than the APTC paid on their behalf, the difference reduces their tax liability or results in a refund to the extent it is more than their tax liability.

Scenario 2

Same as above, except APTC payments weren’t made for Sidney and Nan’s coverage through the Marketplace. They should file their 2018 joint tax return and attach IRS Form 8962, Premium Tax Credit, to calculate the PTC to which they are entitled to claim on their return. 

Where to find it on the tax return: