What is the Premium Tax Credit for Health Insurance?

What is the Premium Tax Credit for Health Insurance?

If you enrolled in a new health insurance plan recently, you may have qualified for a premium tax credit. A premium tax credit is a form of financial assistance that helps with the cost of buying coverage.

The chart below highlights income levels between 100 and 400% of the poverty level. Learn how to estimate your income for the Marketplace.

Who is eligible for a premium tax credit?calculator and pen
Premium tax credits are available to individuals and families who:

  • Have a household income between 100 and 400% of the federal poverty level.
  • Purchased a Health Insurance Marketplace plan (on the Marketplace or an eligible plan on your insurer’s website)
  • Are a U.S. citizen or are lawfully present in the United States.

You are not eligible if you can receive affordable coverage through your job, or if you qualify for one of the following:

  • Medicaid
  • Medicare
  • Children’s Health Insurance Program (CHIP)

Tax Credit Estimator Tool: Learn how to estimate your income for the Marketplace.

How does this affect my tax filing?
The Marketplace will send you a 1095-A form showing your premium amount and advance premium tax credit. You will use this information to report your coverage on your tax return.

How does the premium tax credit work?
When you filled out an application on the Marketplace, information you provided about how much money you make, your family size and the type of plan you purchase was used to see if you qualified for a premium tax credit.

If you qualified for the premium tax credit, you then decided if you wanted to have all, some, or none of your estimated credit applied to your monthly premiums.
If you chose not to have advance credit payments, you may claim the premium tax credit when you file your tax return for the year. This will either lower the amount of taxes you owe on your return or increase your refund.

If you chose to have all or some of the credit paid in advance, you may have to reconcile this on your income tax return. In some cases, the amount of advance payments that the government sent on your behalf will differ from the premium tax credit that you may claim.

Why would the amount of my premium tax credit differ from my advance credit payments?
Changes to your family size, income or employment during the year can change the amount of your premium tax credit. This is why you should update your information in your Marketplace account when these things change.

Notifying the Marketplace of a change decreases the chance that there will be a difference between your advance credit payments and the actual premium tax credit. The following are some events that can affect the amount of your premium tax credit:

  • You get married, divorced, or have a child.
  • Your household income changes.
  • You gain employer-sponsored health care coverage.

If you experienced any of these changes and did not report this to the Marketplace, your actual premium tax credit may differ on your tax return from the advance credit originally estimated by the Marketplace.

Still have questions?
Many tax advisors can help. You can also find more information at healthcare.gov/taxes or at irs.gov or by or calling us at 1-866-793-1515.

Originally published 8/19/2015 Revised 2018