So What Are Advance Premium Tax Credits?
As part of the Affordable Care Act (ACA), the government provides financial help to lower the monthly cost of health insurance. Tax credits are usually claimed when you file your tax return. However, the Advance Premium Tax Credit works differently. After you enroll in a Marketplace health insurance plan and are determined eligible for the Advance Premium Tax Credit, this tax credit is ADVANCED to the health insurance company on your behalf and applied directly to your monthly health insurance premium to lower your monthly cost. This occurs throughout the year, before you file your tax return.
When you enroll in a Marketplace health insurance plan, you are asked to provide an estimate of your household income. This estimate, along with the number of people in your household, is used to determine your eligibility for the Advance Premium Tax Credit. It is also used to determine how much tax credit you receive.
Understanding Reconciliation
If you and/or a member of your household receive the Advance Premium Tax Credit, the tax credit must be reconciled when you file your tax return. The Advance Premium Tax Credit amount that you received was based on an estimate of your household income and your expected family size. So when you file your taxes the amount of Advance Premium Tax Credit you received will be reconciled against what you were actually eligible for based on your actual household income.
If your actual income was less than what you estimated, you may get money back, which could increase your refund amount. However, if your actual income was more than what you estimated, you may need to repay some of your Advance Premium Tax Credit, which could reduce your refund amount. The credit could also be affected by changes in your family size, such as the birth of a child.
And do not forget, you will need your 1095-A form when you file. This form is necessary to reconcile the Advance Premium Tax Credit you received.
If you have any questions, please contact JV LAW GROUP at 714-752-3270 or send us an email info@jvlawgroup.com. We are here to help!
