Premium Tax Credit (PTC) and Form 8962 for Marketplace healthcare users
Did you know there’s a valuable health insurance tax credit available to qualifying taxpayers? The Premium Tax Credit helps eligible individuals and families afford health insurance purchased through the Health Insurance Marketplace, or “Marketplace” insurance.
For details about this credit and other tax benefits for healthcare like the Advance Premium Tax Credit, read ahead.
What is the Premium Tax Credit?
The Premium Tax Credit (PTC), a result of the Affordable Care Act, is a refundable tax credit that can help you lower your insurance premium costs when you enroll in a health plan through the Health Insurance Marketplace or help you cover those costs later come tax time. In other words, the PTC helps make your health insurance monthly premium more affordable by partially subsidizing the cost of private health insurance.
If you qualify, you’ll receive it as an advance credit or claim it as a refundable credit on your tax return. So, even if you owe little or no tax, you can still benefit from the Premium Tax Credit.
File with H&R Block to get your max refund
Premium Tax Credit eligibility
To find out if you can claim Premium Tax Credit, look at your tax household income collectively. If you do qualify, your tax household income will also determine the amount of credit you can claim.
- You must buy your health insurance from the federal or a state Health Insurance Marketplace.
- You must file a joint tax return with your spouse if you’re married. There are exceptions to this if you’re considered unmarried for head of household filing status or if you’re a victim of domestic abuse or spousal abandonment.
- You can’t be claimed as a dependent by anyone else.
- Your tax household income must fall below 400% of the federal poverty level for your family size. Your income must also be above the range for Medicaid eligibility (or above 100% of the federal poverty level (FPL) in states that didn’t expand Medicaid for adults). However, for tax years 2021 through 2025, you can still qualify with a household income of 400% and higher.
Here’s the tax household 100% poverty level that applies for 2024 in the 48 contiguous states:
- Family of one — $14,580
- Family of two — $19,720
- Family of three — $24,860
- Family of four — $30,000Family of five —$35,140
The poverty levels for Alaska and Hawaii are slightly higher.
Alaska:
- Family of one — $18,210
- Family of two — $24,640
- Family of three — $31,070
- Family of four — $37,500
- Family of five — $43,930
Hawaii:
- Family of one — $16,770
- Family of two — $22,680
- Family of three —$28,590
- Family of four — $34,500
- Family of five —$40,410
If you’re not sure if you qualify for this Premium Tax Credit, visit www.healthcare.gov. You’ll be able to shop around for different health coverage plans and get an estimate of your Premium Tax Credit.
Alternatively, an H&R Block tax pro could help you determine your PTC amount. Find an office nearest you.
Advance Premium Tax Credit (APTC)
Now, let’s cover another credit aimed to make health insurance more affordable for individuals and families who purchase healthcare coverage through the Marketplace.
While the name is strikingly similar, the Advance Premium Tax Credit works a bit differently than the Premium Tax Credit. Instead of waiting until you file your taxes to get the credit, you can choose to have the estimated credit paid out monthly. This advanced tax credit is based on your estimated household income when you signed up for Marketplace insurance. It’s paid directly to your insurance provider every month and helps with the health insurance premium you pay out of pocket.
How do you reconcile advance premium tax credits?
When you prepare your taxes, you’ll reconcile the advance paid to your insurance company. You’ll figure this with the amount of the Premium Tax Credit you’re eligible for based on your actual household income.
So, if your actual Premium Tax Credit was less than your advance, you’ll do one of these:
- Subtract the difference from your refund
- Add the difference to your balance due. Keep in mind that the difference is subject to certain caps.
If your Premium Tax Credit is more than your advance, you’ll either:
- Add the difference to your refund
- Subtract the difference from your balance due
How can I avoid paying back excess APTC?
The easiest way to avoid paying back the Premium Tax Credit is to update the Marketplace when you have any life changes. Life changes can influence your estimated household income and credit amount. So, the sooner you can update the Marketplace, the better. This ensures you receive as close to the correct amount as possible.
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 tax dependent
- The death of anyone in your household
- Changes to income
- An offer of job-based health 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
If you receive the Advance Premium Tax Credit, you’ll need to file a tax return for the year even if you don’t meet the income threshold.
An Advance Premium Tax Credit example
Jude signed up for Marketplace insurance and qualified for a $1,800 Advance Premium Tax Credit. The Marketplace advanced $150 a month paid to his health insurance company. Jude got 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 now qualifies for ($1,200).
Jude underestimated his household income for the year. His actual allowed premium tax credit is less than the Advance Premium Tax Credit. For this reason, Jude must pay back the excess credit he received.
Form 8962
If you have health insurance coverage from www.healthcare.gov or your state’s healthcare marketplace, you’ll need to file IRS Tax Form 8962 with the Internal Revenue Service at tax time. This form determines Premium Tax Credit eligibility and the credit amount. You’ll also use Form 8962 to reconcile the PTC you may be eligible for with any advance credit payments you’ve already received.
To help you file Form 8962, the health insurance exchange will send you Form 1095-A. Can’t find your Form 1095-A? You can get a copy from www.healthcare.gov or your state’s exchange portal if you received coverage from a state exchange.
Premium Tax Credit filing: Avoiding a rejected return
Attach Form 8962 to your return if you, a spouse, or a dependent had Affordable Care Act (ACA) Marketplace coverage at some point in the tax year and received the Advance Premium Tax Credit. Attaching the form can help you avoid a rejected e-filed return (shown as Reject Code F8962-070).
If you didn’t have Marketplace insurance within a tax year, you can attach a statement to your e-filed return stating that you didn’t have this coverage.
Get help claiming the Premium Tax Credit
Need assistance claiming the Premium Tax Credit or Advance Premium Tax Credit? Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.
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