The advance premium tax credit can lower monthly health insurance marketplace costs for eligible individuals. It is calculated and distributed directly by the federal government to your health insurance marketplace in order to reduce premium costs.
Your tax advance payments are calculated based on an estimation of your income; should it exceed this projection, any excess advance payments must be returned at tax time.
What is APTC?
Premium tax credits (APTCs) are one way for you to help cover health insurance costs through the marketplace. Your APTC is calculated based on expected income for the year and applied directly towards monthly premium costs.
The American Payroll Tax Credit can either be claimed up-front, or it can be delayed and claimed with your taxes at year’s end. If waiting, Form 8962 should be submitted with your return in order to reconcile the estimated credit with actual income figures.
No matter how soon or late you claim your APTC, Vermont Health Connect needs to stay informed of any changes in your income to avoid what is known as “APTC exhaustion.” When this occurs, any remaining credits must be returned or they will expire and you could face paying back any portion not used up in full or partially used up by way of penalties and interest payments. Accurate information could save money on insurance costs while possibly helping avoid having to repay back any portion of your advance premium tax credit in full or partially.
How does APTC work?
The Advanced Premium Tax Credit is calculated and disbursed monthly by the government on your behalf to your insurance provider. Its amount depends on how your projected income compares with poverty threshold levels for your household size; if you underestimated it at purchase time, any unused portion could require repayment during tax season.
Individuals and families whose incomes fall between 100% and 400% of the poverty level (based on household size) typically qualify for premium tax credits to help cover marketplace coverage premiums. Under the Inflation Reduction Act of 2022, these tax credits became available even for people whose income exceeds 400% of this threshold.
However, if your income changes during the year, it’s important to report these adjustments so your credit can be appropriately adjusted. Individuals who received advance payments of the credit in previous years had to reconcile it on their taxes at year end to either get back a refund or reduce their liability.
How do I qualify for APTC?
When enrolling in a marketplace plan, you have the option to receive your advance premium tax credit as monthly payments from the government directly to your insurance provider, thus lowering monthly premium costs. When filing federal income tax returns later on in the year using IRS Form 8962, these advance payments must be “reconciled”.
Your Advanced Payment Tax Credit (APTC) is calculated based on an estimate of your income for next year and how many members make up your tax family (such as yourself, spouse and any dependent children or dependent adults). Should your actual income change during the year, so too could any advance payments made to you.
To qualify for the American Payroll Tax Credit (APTC), your household income must fall between 100% and 400% of poverty level in any given year, although for 2021-2022 this threshold has been temporarily raised to 60% of poverty level for both singles and families. You must also be eligible for coverage through either your employer, Medicare Medicaid, or CHIP programs.
How do I apply for APTC?
To qualify for the Advanced Premium Tax Credit (APTC), people must first register coverage through the marketplace and report their income throughout the year. Once approved, advance payments will be sent directly to their insurance provider each month from the marketplace to help pay their premiums – however since people’s income can fluctuate throughout the year, actual credit may differ from what was estimated initially.
APTC eligibility generally requires enrollment in a marketplace plan and household income between 100% and 400% of poverty (based on family size) — though this limit has been temporarily lifted for 2021 and 2022. In addition, you cannot be claimed as someone else’s dependent, nor file as married filing separately (though exceptions exist for survivors of domestic violence and spousal abandonment).
At the end of every year, it is necessary to file IRS Form 8962 along with your tax return in order to reconcile your APTC account. Your 1095-A will provide information about what premiums were paid and any advance credits awarded that year.
