From the Desk of Michael T. McCormick
THE PREMIUM TAX CREDIT
Happy Friday tax tips day! Hopefully you had a great week. Today’s tip has to do with the Affordable Care Act. I have fielded a ton of questions this tax season on this complex law and over the next couple weeks I intend to try and break this down so that you can determine if it applies to your tax return and of course some possible opportunities for tax savings. My first discussion has to do with the premium tax credit. If you or anyone on your federal tax return is enrolled in health insurance coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit.
Here are some basic facts about the premium tax credit.
What is the premium tax credit?
The premium tax credit is a credit that helps eligible individuals and families with low or moderate incomes afford health insurance purchased through the Health Insurance Marketplace.
What is the Health Insurance Marketplace?
The Health Insurance Marketplace is the place where you will find information about private health insurance options, purchase health insurance, and get help with premiums and out-of-pocket costs, if you are eligible.
How do I get the premium tax credit?
When you apply for coverage, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim for the tax year, using information you provide about your family composition and projected household income. Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums.
If you choose to have all or some of your credit paid in advance, you will be required to reconcile on your income tax return the amount of advance payments that the government sent on your behalf with the premium tax credit that you may claim based on your actual household income and family size. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
What happens if my income or family size changes during the year?
The actual premium tax credit for the year will differ from the advance credit amount estimated by the Marketplace if your family size and household income as estimated at the time of enrollment are different from the family size and household income you report on your return. The more your family size or household income differs from the Marketplace estimates used to compute your advance credit payments, the more significant the difference will be between your advance credit payments and your actual credit.
Am I Eligible to Claim the Premium Tax Credit?
You can take the PTC for 2015 if you meet all of these conditions.
For at least one month of the year, all of the following were true:
- An individual in your tax family was enrolled in a qualified health plan offered through the Marketplace.
- The individual was not eligible for minimum essential coverage, other than coverage in the individual market.
- The portion of the enrollment premiums for the month for which you are responsible was paid by the due date of your tax return.
To be an applicable taxpayer, you must meet all of the following requirements:
- For 2015, your household income is at least 100 percent but no more than 400 percent of the Federal poverty line for your family size.
- No one can claim you as a dependent on a tax return for 2015.
- If you were married at the end of 2015, you must generally file a joint return. However, filing a separate return from your spouse will not disqualify you from being an applicable taxpayer if you meet certain requirements.
Needless to say this can be a big headache to figure out. If you think you may qualify for the credit fell free to contact one of our professionals for an analysis.
-Michael T. McCormick