All You Need to Know About Advanced Premium Tax Credits

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Americans often wonder what exactly an advanced premium tax credit (APTC) is and how it could offset the costs of a health insurance plan. To start, if you have purchased or are considering purchasing Marketplace insurance, you may be one of the millions of Americans eligible for an APTC to help pay for health insurance premiums.

How does it work?

Using your projected annual household income and household size, the Marketplace estimates what your 2016 premium tax credit will be when you apply. The process to determine your premium tax credit also depends on several variables like marriage status, location, dependents, etc.

What does this mean for my taxes?

Starting in February, all Marketplace enrollees will receive Form 1095-A which will include information regarding your health insurance coverage such as your monthly premium cost, the date you were insured, and your APTC.

When you file your 2015 taxes with TurboTax, you will enter the information from the Form 1095-A just like you would a W-2. TurboTax calculates the APTC’s you were eligible for based on your actual income and family size.

But don’t worry, TurboTax makes reporting the APTC you were eligible for easy by doing the calculations for you based on your entries! All ACA related tax forms are included at no extra cost through TurboTax.

You can also check out a free tool the IRS provides to estimate your tax credit.

What if I calculated incorrectly?

If you overestimated your income when you applied for a subsidy, you may see a larger tax credit on your taxes if you took your health insurance tax credits up front on the Marketplace. However, if you underestimated, you may see a lower tax refund and in some cases you may owe money back. It may be possible to reduce your income and avoid paying back and APTC if for example you pay into your IRA before April 15th.

Moving forward for 2016, in order to receive the most accurate APTC, make sure to notify the Marketplace about any changes in your circumstances as soon as they happen. And if it’s possible, TurboTax recommends only taking half of the APTC up front to avoid any surprises come tax time.

Some of the changes in circumstances that can affect the amount of your ATPC and should be reported to the Marketplace include:

  • Increases or decreases in household income
  • Marriage/Divorce
  • Birth or adoption of a child
  • Other changes in household composition
  • Gaining or losing eligibility for government-sponsored or employer-sponsored health care coverage
  • Change of address

Have more questions about the Affordable Care Act and how it impacts your taxes and finances? Don’t sweat it, TurboTax has you covered. Go to TurboTax Health to get your questions answered.



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