What Is The Premium Tax Credit?

 Premium Tax Credit

The Premium Tax Credit is a refundable tax credit that helps eligible taxpayers with moderate incomes to be able to afford health insurance purchased through the Health Insurance Marketplace. To be eligible for the credit, you need to satisfy five rules. 

1. You need to get your health insurance coverage through the Health Insurance Marketplace.
2. Your household income must be between one and four times the federal poverty line. For a family of four for tax year 2014, that means income from $23,550 to $94,200.
3. You can’t be eligible for other coverage, such as Medicare, Medicaid, or employer-sponsored coverage.
4. You do not file a Married Filing Separately return; and
5. You cannot be claimed as a dependent by another person.

If the Marketplace determines that you’re likely to qualify for the tax credit, you have two choices: (1) you can choose to have some or all of your estimated tax credit paid in advance directly to your insurance company to lower your monthly premiums during 2014. Or, (2) you can wait to get all of the tax credit when you file your 2014 tax return in 2015.  If you choose to wait to get the credit, it will either increase your refund or lower your balance due. 

Either increase your tax refund or lower your balance due.

If you choose to receive the credit in advance, any changes in your household income or family size will affect the credit that you are eligible to receive. If the credit on your tax return you file in 2015 does not match the amount you have received in advance, you will have to repay any excess payment.  Therefore, it is important to tell your Marketplace any changes in your income or family size as they happen during 2014.

Reporting changes will allow the Marketplace to adjust your advance credit payment. This adjustment will help you avoid getting a smaller refund or owing money that you did not expect to owe when you file your 2014 tax return in 2015. 

Whether you choose to get the credit now or later, you must claim it by filing a federal income tax return. When you file your 2014 tax return, you will subtract the total of any advance payments that you received during the year from the amount of the premium tax credit calculated on your tax return. This may affect your tax refund or balance due. If you are entitled to receive more credit than you have already received, this will either increase your refund or lower your balance due.

If you have any questions, please feel free to email us.

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Source:  www.irs.gov.

Email:   Excellent-tax@gmx.com