The Premium Tax Credit
Facts about the Premium Tax Credit
Premium Tax Credit
Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. This tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. The 2014 Open Enrollment Period has ended. However, under certain circumstances eligible individuals may qualify for a Special Enrollment Period and can buy a private health plan through the Marketplace. Visit Healthcare.gov for details of who is eligible for a Special Enrollment Period.
The Department of Health and Human Services administers the requirements for the Marketplace and the health plans they offer. For more information about your coverage options, financial assistance and the Marketplace, visit HealthCare.gov.
In general, you may be eligible for the credit if you meet all of the following:
- buy health insurance through the Marketplace;
- are ineligible for coverage through an employer or government plan;
- are within certain income limits;
- do not file a Married Filing Separately tax return (unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status); and
- cannot be claimed as a dependent by another person.
If you file your tax return using the filing status Single, Married Filing Jointly, Head of Household (including married individuals who qualify to use the Head of Household status) or Qualifying Widow/Widower, you may be eligible for the premium tax credit if you meet the other criteria. If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status.
Getting the Credit
To qualify for the credit, you must get insurance through the Marketplace.
If you are eligible for the credit, you can choose to:
- Get It Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums; or
- Get It Later: wait to get all of the credit when you file your tax return.
During enrollment through the Marketplace, using information you provide about your projected income and family composition for the year, the Marketplace will estimate the amount of the premium tax credit you will be able to claim on your tax return.
You will then decide whether you want to have all, some or none of your estimated credit paid in advance directly to your insurance company.
Change in Circumstances
Report income and family size changes to the Marketplace throughout the year. Reporting changes will help make sure you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance. Receiving too much or too little in advance can affect your refund or balance due when you file your tax return.
For example, if you do not report income or family size changes to the Marketplace when they happen, the advance payments may not match your actual qualified credit amount on your federal tax return. This might result in a smaller refund or a balance due.
Claiming the Credit on Your Federal Tax Return
For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a federal income tax return for that year.
If you choose to get it now: When you file your tax return, you will subtract the total advance payments you received during the year from the amount of the premium tax credit calculated on your tax return. If the premium tax credit computed on the return is more than the advance payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. If the advance credit payments are more than the premium tax credit, the difference will increase the amount you owe and result in either a smaller refund or a balance due.
If you choose to get it later: You will claim the full amount of the premium tax credit when you file your tax return. This will either increase your refund or lower your balance due.
More detailed information about the credit is available in our Questions and Answers.
The Department of the Treasury and the IRS issued the following legal guidance related to the premium tax credit:
- Final regulations on the rules for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit.
- Final regulations on the premium tax credit affordability test for related individuals.
- Proposed regulations on determining minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit.
- Notice 2013-41 on determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high risk pool programs.