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Reconciliation and Repayment of Premium Tax Credit

When you prepare your taxes, you’ll have to reconcile the advance that was paid to your insurance company. Figure this with the actual amount of the premium tax credit you’re eligible for.

This is necessary since there can be a difference between the advance and your actual premium tax credit.

So, if the amount of premium tax credit you’re eligible for is less than the advance you received, we’ll do one of these for you:

  • Subtract the difference from your refund
  • Add the difference to your balance due
  • Keep in mind that the difference is subject to certain caps.

However, if the amount of premium tax credit you're eligible for is more than the advance you received, we’ll do one of these:

  • Add the difference to your refund
  • Subtract it from your balance due

Why do I have to do this?

The advance premium tax credit is based on your estimated income (when you signed up) for the year and your family size. However, your income can change since it’s only an estimate, and your family size can also change. After the end of the year, when you prepare your taxes, we calculate the premium tax credit based on your actual household income.

When there’s a difference in these amounts, you either get a credit on your return, or you’ll need to repay some or all of the excess you received.

And if your household income is less than 400% of the federal poverty level, the amount you’ll need to repay will be limited.

Ex: Jude got insurance through the marketplace and qualified for a $1,800 advance premium tax credit. The marketplace advanced $150 a month to his health insurance company. Jude received a raise halfway through the year but didn’t inform the marketplace of his change in income. At the end of the year, Jude must reconcile his advance premium tax credit ($1,800) with the amount of premium tax credit he’s actually qualified for ($1,200).

Jude underestimated his household income for the year. So, his actual allowed premium tax credit is less than the advance premium tax credit. Jude must pay back the excess $600 credit he received.

How can I avoid it?

The easiest way to avoid having to repay a credit is to update the marketplace when you have any life changes. Life changes influence your estimated household income, your family size, and your credit amount. So, the sooner you can update the marketplace, the better. This ensures you receive the correct amount. A life change includes:

  • A marriage or divorce
  • Having a baby, adopting a child, or placing a child for adoption or foster care
  • A child on your policy turning 26 or a dependent changing status so they’re no longer your dependent
  • The death of anyone in your household
  • Changes to income
  • An offer of job-based insurance coverage to anyone in your household, even if they don’t enroll in it
  • Someone in your household getting coverage from a public program, like Medicaid, Children's Health Insurance Program (CHIP), or Medicare
  • A change to your permanent home address

To report a life change, visit www.healthcare.gov.

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Calculators

So how much will you get (or owe) this year? That’s the million-dollar question. We happen to have three very useful calculators to help you estimate your refund or balance due.

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