If you purchased health insurance in the Health Insurance Marketplace in 2014 and received an advanced premium tax credit or you were required to purchase health insurance and did not in 2014, you may see a difference in your tax refund, however either situation will not necessarily reduce your tax refund. In fact, if you received an advanced premium tax credit that was too low you may see a bigger tax refund.
Advanced premium tax credits
If you’re among the millions of people who received discounted coverage from the Health Insurance Marketplace, you may see a bigger premium tax credit if your estimated income was overstated and you received too small a tax credit to offset the cost of monthly insurance premiums.
On the other hand, you may see a lower actual premium tax credit or get a smaller tax refund if your income estimate was too low when you applied for 2014 health insurance.
Why the adjustments? When you prepare your 2014 taxes, your actual premium tax credit allowed is compared to your advanced premium tax credit received in 2014 based on your estimated income.
Remember, TurboTax searches for valuable tax credits and deductions that may also offset excess premium tax credits you owe.
Penalty relief for excess tax credits
Taxpayers who can’t pay the balance on their 2014 taxes due to an excess advanced premium tax credit may be able to receive some penalty relief. They may not need to pay the late payment for the balance due or the penalty for underpaying estimated taxes as long as they file their 2014 taxes.
Tax penalty for the uninsured
People who were uninsured may face a tax penalty – unless they qualify for an exemption. The tax penalty for 2014 is $95 per person and $47.50 per child (capped at $285 for families) or 1 percent of your taxable household income – whichever amount is larger.
If you owe a tax penalty, the penalty is deducted from your tax refund or the sum is added to the total balance you owe. The IRS, however, can’t use liens and levies to collect the penalty on people who remained uninsured.
Report life-changing events
To avoid surprises at tax time, promptly report changes to your income or family circumstances to the federal or state-run Marketplaces so your account can be adjusted.
TurboTax does not charge extra to file Affordable Care Act tax forms. With TurboTax you can easily file your taxes and report your health care coverage under the Affordable Care Act.