If you or your family members enroll in coverage from the Health Insurance Marketplace, you may be eligible for a refundable credit that helps cover premiums for health insurance.
Under the American Rescue Plan Act (ARPA), there is also a new regulation that you won’t have to pay back your premium tax credit from 2020.
Let’s dive a little deeper.
What is the health insurance credit, and are you eligible?
If you’re eligible for the premium tax credit, you can either collect the credit in full at the end of the year once you’ve filed your tax return, or you can take it as a reduction of your monthly premium cost (advance credit payments). However, the reduction of the monthly premium is only an estimate until you file a tax return.
Essentially, if you have a $200 monthly health insurance premium but you are eligible and apply for a $100 credit, the government is paying that part of your health insurance.
- Your household income must be within a certain range, with higher credit available to lower incomes
- You do not file a tax return as married filing separately
- You cannot be claimed as a dependent
- In the same month, you or a family member have coverage through a Health Insurance Marketplace, you do not receive affordable, minimum value coverage through an employer, you do not have coverage through a government plan, and you pay the share of premiums not covered by advance credit payments.
When you enroll in coverage, the Health Insurance Marketplace will determine whether or not you are eligible for advance credit payments. If you do receive them, you should report any life changes to the Health Insurance Marketplace throughout the year as changes to household, income, or family size can change the amount of your tax credit.
These tax credits have been occurring for around a decade now, but in the past, advance credit payments had to be paid back at the end of the year if your income raised to a certain level. Under the ARPA rule, this is not the case for 2020, no matter if your income goes up throughout the year.
Have any questions?
If you want to know whether you’d be eligible for this tax credit payment on your health insurance premium, the team at Shaw & Associates is your go-to accountant. We can help answer any questions you may have and assist you in completing the correct forms. Reach out to us today to set up a meeting at 970-223-0792 or visit our website for more information.