Advance Premium Tax Credit Repayment

What If You Received Excess Advance Payments

You must pay the excess amount back as an additional tax if your advance payments are more than your premium tax credit. However, your repayment amount might be limited if your household income is less than four times the federal poverty line.

Your household income as a percentage of the federal poverty line is calculated and entered on Line 5 of Form 8962, and yes, it comes with instructions.

Eligibility Requirements For The Premium Tax Credit

You must meet all of the following criteria to qualify for the premium tax credit:

• You must get your health care coverage through the Marketplace
• You can’t be eligible for health care coverage through alternative options such as your employer or the government
• Your income needs to fall within a certain range
• Another person can’t claim you as a dependent on their return
• You must file a joint return if you’re married

Changes in income and family size may affect your eligibility, so report these to the Marketplace to ensure you receive the appropriate tax credit. The premium tax credit program uses the federal poverty line to determine the income ranges that qualify you for the credit.

The U.S. Department of Health and Human Services reports the annual federal poverty levels, which vary depending on whether you live in the contiguous 48 states and the District of Columbia, Hawaii, or Alaska.

The range is 100% to 400% of the federal poverty line amount for the size of your family for the current tax year.

For example, an individual earning between $13,590 and $54,360 in 2022 meets the income criteria to qualify, while a family of four qualifies with household earnings between $27,750 and $111,000.

Even if your income makes you eligible, you must meet the other qualification criteria as well. You’ll use Form 8962 to determine your full eligibility to claim the premium tax credit.

Reconciliation Required In 2021 But Subsidy Cliff If Gone

ARPAs suspension of the repayment of the excess APTC applied to tax year 2020 only. This means that taxpayers must again repay excess APTC in 2021 after reconciling the payment using Form 8962. By allowing all persons, regardless of income, to qualify for a PTC for premium amounts in excess of 8.5%, however, ARPA removed the subsidy cliff for 2021 and 2022. This means repayment amounts triggered by reconciliation will generally be less.

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Canadian Tax Credits For Family Caregivers

In Ontario, only 3% of caregivers receive any form of supplementary income. Examples of this type of income include social assistance or welfare, child tax benefits, workers compensation or tax credits and deductions. The 3% is a startling number when one takes a moment to consider the time, effort, and money required to care for somebody with a disability. When a family caregiver misses out on these tax credits and other forms of assistance, it means that their budgets are often stretched beyond their means. The benefits and tax credits that they could be eligible to receive are essential for offsetting expenses like medications, therapy and even non-medical expenses such as the cost of transporting people they care for to and from appointments with their doctor.

It is also worth noting that many caregivers have made one of the greatest sacrifices of all they have stopped working in order to stay home and care for a disabled loved one. So, on top of the extra expenses resulting from the needs of the disabled family member, they also have to deal with a significant loss of income. This can be more than just overwhelming it can be downright crippling for many families. If you are a caregiver and you would like to know more about tax credits and benefits, the following three options are the best place to start.

Whats The Most I Would Have To Repay The Irs

For the 2022 tax year, you must repay the difference between the amount of premium tax credit you received and the amount you were eligible for. There are also dollar caps on the amount of repayment if your income is below 4 times the poverty level.

Repayment Limits for Advanced Premium Tax Credits, 2022 Tax Year

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If You Do Not Notify The Marketplace Of Changes During The Year

When you claim the credit on your federal tax return, you’ll need to repay about . The repayment is limited to because your income is of the federal poverty line. If you don’t have enough tax withheld or don’t have other credits to offset this amount, you may have a balance due when you file.

When you claim the credit on your federal tax return, the additional may be refunded .

You will receive the correct amount of advance credit payments to match your premium tax credit.

The Premium Tax Credit

• Legal Guidance and Other Resources

The IRS will soon mail letters on behalf of the Center for Medicare & Medicaid Services, sharing information about obtaining Marketplace healthcare coverage. More information is available in the IRS Statement about Letter 6534.

The premium tax credit also known as PTC is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit .

2021 and 2022 PTC Eligibility. For tax years 2021 and 2022, the American Rescue Plan Act of 2021 temporarily expanded eligibility for the premium tax credit by eliminating the rule that a taxpayer with household income above 400% of the federal poverty line cannot qualify for a premium tax credit.

2021 Unemployment Compensation. If you, or your spouse , received, or were approved to receive, unemployment compensation for any week beginning during 2021, the amount of your household income is considered to be no greater than 133% of the federal poverty line for your family size and you are considered to have met the household income requirements for eligibility for a premium tax credit. Keep any supporting documentation related to receiving or the approval to receive unemployment compensation with your tax return records.

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Special Rule For Those Receiving Unemployment Compensation

ARPA also provides that taxpayers who received unemployment compensation for any week beginning during 2021 are automatically eligible for the PTC. ARPA allows these taxpayers to calculate the PTC as though household income does not exceed 133% of the FPL.

This 2021 change means that Marketplace-eligible taxpayers receiving unemployment benefits at any time in 2021 will have a full premium subsidy if they choose to enroll in the second-lowest priced silver plan. Other rules continue to apply, however, with respect to eligibility, meaning that taxpayers for whom affordable employer-based health insurance is available are excluded from eligibility for a PTC. ARPA did not fix the family glitch, referenced above.

No Repayment Of Excess Aptc For Tax Year 2020 Only

ARPA suspended the requirement to repay excess APTC for tax year 2020. If a taxpayers APTC exceeded the actual PTC, no additional tax was imposed, regardless of household income. Taxpayers who received too much APTC were not required to report the excess APTC or even file the Form 8962. For taxpayers who had already filed and paid the tax, IRS automatically reduced the excess APTC and issued a refund. IRS instructed taxpayers not to amend their returns.

Taxpayers who were eligible for an additional PTC not paid through the APTC continued to file the Form 8962 in 2020 to claim the credit.

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Reconciling Your Payments On Form 8962

If you choose to receive premium tax credit advance payments, you must complete and submit Form 8962 at tax time to determine whether the payments made to your insurer were too little, too much, or exactly what you were entitled to receive. Known as “reconciling” the advance payments, this means comparing the amount your insurance company received to the actual amount of the premium tax credit to which youre entitled.

You can receive any additional tax credit that’s due you if the Internal Revenue Service paid too little in advance, but you must pay any extra amount back to the IRS if it paid your insurer too much. If the IRS paid out exactly the right amount, you won’t owe money to the IRS, but you won’t receive any extra tax credit when you file, either.

Reporting Changes In Circumstances

If you purchased health insurance coverage through the Marketplace and chose to receive the benefit of advance payments of the premium tax credit, it is important to report certain life events to the Marketplace throughout the year these events are known as changes in circumstances.

If your household income goes up or the size of your household is smaller than you reported to the Marketplace – for example, because a son or daughter you thought would be your dependent will not be your dependent for the year of coverage – your advance credit payments may be more than the premium tax credit you are allowed for the year. If you report the change, the Marketplace can lower the amount of your advance credit payments. If you don’t report the change and your advance credit payments are more than the premium tax credit you are allowed, you have to reduce your refund or increase the amount of tax you owe by all or a portion of the difference when you file your federal tax return.

If your household income goes down or you gain a household member, you could qualify for more advance credit payments than are now being paid for you. This could lower what you pay in monthly premiums. In addition, reporting your lower household income or new family member could reveal that you qualify for Medicaid or CHIP coverage that is less costly than your Marketplace plan.

Changes in circumstances that can affect the amount of your actual premium tax credit include:

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Excess Premium Tax Credit Repayment

If the taxpayer received an advance premium tax credit to help pay for their monthly health insurance premiums, a reconciliation of their total amount of advance premium tax credit with the calculated premium tax credit will be done on Form 8962.

Since the amount of the advance premium tax credit is calculated based on income and family size from a prior year, the total advance received will probably not equal the calculated premium tax credit which is based on the income and family size reported on their 2021 federal tax return.

If the amount of advance premium tax credit is greater than the calculated credit, then the taxpayer will have to pay back the difference. It is reported as an additional tax on Form 1040, Schedule 2 and is calculated on Form 8962, Part III.

Premium Tax Credit Repayment Exceptions

There is no exception to having to repay any excess premium tax credit that results from receiving more advance premium tax credit than the calculated credit

Any excess premium tax credit will be limited to a maximum amount of the taxpayers household income as percentage of the federal poverty line is as follows:

If the percentage on Form 8962, line 5 is 400% or higher, the entire amount of any amount of excess premium tax credit is due.

The excess premium tax credit is also not limited if one of the following situations applies to the taxpayer:

Can I Get Other Tax Benefits For Health Premiums If Im Not Eligible For The Credit

Health insurance premiums and co-pays qualify as deductible medical expenses, along with other medical costs, subject to certain limitations. Medical costs can be deducted, but only if you itemize deductions and only to the extent that such costs exceed 7.5% of your adjusted gross income.

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How To Apply For The Advance Premium Tax Credit

When you buy health insurance at Healthcare.gov or your state marketplace, you estimate your income for the year, which is used to calculate your subsidy.

When you apply for coverage, you can choose how much of the premium tax credit to apply to your premiums now. You can receive the remainder of the tax credit when you file your income-tax return for the year.

Income Reporting And Advanced Premium Tax Credits Repayment

When you apply for health coverage and financial help from Vermont Health Connect, you will be asked to estimate your income for the upcoming year. One type of financial help is called . Premium tax credits can be taken in advance during the year to reduce your health insurance premiums.

If you qualify, you can choose to take your premium tax credits either:

When you take premium tax credits before you file your federal income taxes, they are called advance premium tax credits, or APTC. Estimating your income in advance can be trickyespecially if your income changes during the year. If your total yearly income at the end of the year is more than you expected, you may have to pay back some of your premium tax credits when you file your federal income taxes. Your household size and income might limit the amount you have to repay .

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How Do I Apply

Incorporated Business

Corporations may claim the tax credit on Schedule T2SCH550 of their T2 Corporation Income Tax Return.

Unincorporated Business

Employers operating unincorporated businesses may claim the credit on Form ON479, Ontario Credits, included in their personal income tax return.

Others

Members of partnerships claim their share of the credit on their own corporate or personal tax returns.

Advance Payments Of The Premium Tax Credit

When you enroll in coverage and request financial assistance, the Health Insurance Marketplace will estimate the amount of the premium tax credit you will be allowed for the year of coverage. To make this estimate, the Marketplace uses information you provide about:

• Your family composition
• Your household income
• Whether those you are enrolling are eligible for other non-Marketplace coverage

Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf. These payments which are called advance payments of the premium tax credit or advance credit payments lower what you pay out-of-pocket for your monthly premiums.

If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

For tax years 2021 and 2022, the American Rescue Plan Act of 2021 , enacted on March 11, 2021, temporarily expanded eligibility for the premium tax credit by eliminating the rule that a taxpayer is not allowed a premium tax credit if his or her household income is above 400% of the federal poverty line.

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Second Lowest Cost Silver Premium

The SLCSP is the premium for the second lowest cost silver-level plan that covers all the members of the coverage family. At the time of enrollment, the Marketplace determines the SLCSP and calculates a PTC that enrollees can use in advance to lower monthly premiums . Individuals can look up the SLCSP based upon their demographics on healthcare.gov. ” rel=”nofollow”> https://www.healthcare.gov/tax-tool/#/premium-tax-credit].

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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What Is The Advanced Premium Tax Credit And How Does It Work

Who is this for?

If you buy your own health insurance, you’ll want to know about this tax credit that you can apply to what you pay each month for your plan.

Because of the Affordable Care Act, many people who buy their own health insurance can get financial assistance that lowers your costs. This assistance is called a subsidy. There are two kinds of subsidies: the Advanced Premium Tax Credit and Cost Sharing Reduction.

The Advanced Premium Tax Credit goes toward your health insurance premiumwhat you pay each month to maintain your health coverage. You can apply it to our bronze, silver, gold and platinum plans. Here’s what else you need to know about the premium tax credit.

Tip: Using your Advanced Premium Tax Credit will be easiest if:

• Your family is all on one health insurance plan
• You file one tax return for the whole family

If this scenario doesn’t apply to you, it’s a good idea to get advice from a legal or tax professional.