By Ken Snow
Faculty Member, Accounting and Finance at American Public University
The passage of the Patient Protection and Affordable Care Act (ACA) in 2010, while controversial, fulfilled its intended mission to help low-income Americans obtain affordable health insurance. According to the latest government data, in 2015, one in six citizens were covered with an ACA Health Insurance Marketplace plan for $100 or less. Of those citizens covered by ACA, 87% received some type of financial assistance. In 2016, seven out of 10 Marketplace customers paid less than $75 per plan.
How the Premium Tax Credit Impacts Your ACA Health Insurance Costs
IRS Form 8962 is used to calculate how much of a Premium Tax Credit (PTC) you will receive or the amount you will have to pay back for purchasing health insurance through the The Marketplace, which determines the credit by projecting the income of the individual or family. To qualify for the PTC, an individual or family is required to meet the following qualifications:
· Must purchase insurance through the Marketplace
· Insurance premium was paid on time unless an extension was requested
· Meet the income threshold
· Not eligible for employer health insurance
· Individual cannot be claimed on a tax form by anyone
Taxpayers are required to file Form 8962 with their tax returns if the insurance purchaser receives the PTC. According to the IRS, “You must file a federal income tax return and attach Form 8962 to the return if:
· Advance credit payments were paid to your health insurer for you or another individual in your tax family.
· Advance credit payments were paid for an individual, including you, for whom you told the Marketplace you would claim a personal exemption and no one, including you, claims a personal exemption for that individual.
· You choose to claim the premium tax credit.
Who Receives the PTC and Other Factors Affecting It
You receive a PTC based on the Modified Adjusted Gross Income (Modified AGI) from your income tax form. If you or your family has a household income below 100% of the federal poverty line, you will receive the PTC. If you or your family has a household income above 400% of the federal poverty line, the PTC must be repaid.
Other factors that may affect the PTC are:
· Change in marriage status.
· Number of family members (i.e., birth of child).
· Change in income, including increases and decreases.
· Married and filing separately versus married filing jointly.
If You Prepare Your Own Taxes, Check Your Information Carefully
If you’re preparing Form 8962 yourself, be sure to double-check the form and your calculations. If you decide that you do not have the confidence to complete this form accurately, ask a tax professional for help.
About the Author
Ken Snow is a professor in the Business school at American Public University. He received an undergraduate degree in accounting from Athens State University and a graduate degree in accounting from Florida Tech. Currently, Ken is working on a Ph.D. in Accounting from Northcentral University.
