Imagine that you are one of the millions of Americans who do not have access to affordable and quality health insurance. You are worried about getting sick or injured, and how you will pay for the medical bills. What if there was a way to get health coverage that suits your needs and budget, and also get a tax credit that reduces your tax liability or increases your refund? Sounds too good to be true, right?
Well, it is not. Thanks to the Affordable Care Act (ACA), also known as Obamacare, you can enroll in a health plan through the Health Insurance Marketplace and apply for the Premium Tax Credit (PTC), which is a refundable tax credit that helps you pay for your health insurance premiums. As you can see, the answers are not far from your nose. All you have to do is dive into this article to have a clear understanding of how to claim the PTC and enjoy the benefits of the ACA.
- Understand What the Affordable Care Act And the Premium Tax Credit Represent
- Know Who Needs Affordable Care Act Premium Tax Credit
- Understand the Eligibility Criteria
- Know How to File Form 8962
- Know How to File Form 1095-A
- Understand the Process of Filing Form 8962 with Form 1040, Form 1040-SR, or Form 1040-NR
- Keep Your Records
- Know the Common Tips to Follow
1. Understand What the Affordable Care Act And the Premium Tax Credit Represent
Keep in mind that the government enacts ACA, a comprehensive healthcare reform law in 2010. It has three main goals:
- To expand health insurance coverage,
- To improve healthcare quality and affordability, and
- To reduce health care costs.
With ACA, you can access various benefits and protections such as preventing insurance companies from denying coverage or charging more based on pre-existing conditions, providing free preventive care, expanding Medicaid eligibility, and creating the Health Insurance Marketplace, where people can shop for and compare health plans.
Think of the PTC as a tax credit that reduces the amount of tax you owe or increases your refund, depending on your income and family size. Be aware that PTC is based on a sliding scale, meaning that the lower your income, the higher your credit.
You can choose to receive the PTC in advance, which means that the Marketplace applies some or all of your estimated credit to your monthly premium payments, lowering the amount you have to pay out of pocket. Alternatively, claim the PTC when you file your tax return, which means that you pay the full amount of your premiums during the year and receive the credit as a lump sum when you file.
2. Know Who Needs Affordable Care Act Premium Tax Credit
Note that the government designs the ACA and the PTC for you if you do not have access to affordable and adequate health insurance through your employer, Medicare, Medicaid, or other sources. If you are uninsured or underinsured, you may benefit from enrolling in a health plan through the Marketplace and applying for the PTC.
However, know that not everyone who enrolls in a Marketplace plan is eligible for the PTC. There are certain criteria that you have to meet to qualify for the credit.
3. Understand the Eligibility Criteria
To be eligible for the PTC, you have to meet the following requirements :
- Purchase a health plan through the Marketplace for yourself or a member of your tax household.
- Have a household income that is between 100% and 400% of the federal poverty line for your family size. The federal poverty line varies by state and year, and you can check the current figures on gov.
- Be eligible for other health coverage through your employer, Medicare, Medicaid, or a government-sponsored program.
- Do not file a married filing as a separate tax return, unless you meet certain exceptions, such as being a victim of domestic abuse or spousal abandonment.
- Claim a personal exemption for yourself and any individual you enroll in Marketplace coverage unless you are claiming the individual as a dependent.
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4. Know How to File Form 8962


Use Form 8962 to calculate and claim the PTC. You have to file Form 8962 with your federal income tax return if you are eligible for the PTC and you want to claim it.
To fill out Form 8962, you need the following information:
- Your tax return information, such as your filing status, exemptions, and modified adjusted gross income (MAGI).
- Your Form 1095-A is a statement that you receive from the Marketplace that shows the details of your health plan.
- Your Form 1040, Form 1040-SR, or Form 1040-NR, are the forms that you use to file your federal income tax return.
5. Know How to File Form 1095-A

Think of Form 1095-A as a statement that you receive from the Marketplace that shows the details of your health plan, such as the monthly premiums, the SLCSP premium, and the advance payments of the PTC, if any. Expect Form 1095-A by early February of the year following the coverage year. You can also access your Form 1095-A online through your Marketplace account.
Understand that you need Form 1095-A to fill out Form 8962 and claim the PTC. You also need Form 1095-A to report any changes in your circumstances that may affect your eligibility or amount of the PTC, such as changes in your income, family size, or enrolment status.
Some common errors or issues that may occur on Form 1095-A are:
- Incorrect or missing information about your coverage, such as the start or end dates, the number of individuals covered, or the plan name or category.
- Incorrect or missing information about your premiums, such as the total monthly premium, the SLCSP premium, or the advance payments of the PTC.
- Duplicate or missing forms, such as receiving more than one Form 1095-A for the same coverage year, or not receiving Form 1095-A at all.
6. Understand the Process of Filing Form 8962 with Form 1040, Form 1040-SR, or Form 1040-NR
Are you done with Form 8962? The next thing to do is to file it with your federal income tax return, which is either Form 1040, Form 1040-SR, or Form 1040-NR, depending on your situation. Form 1040 is the standard form that most taxpayers use to file their federal income tax return.
Form 1040-SR is a simplified version of Form 1040 that is available for taxpayers who are 65 or older. Form 1040-NR is the form that nonresident aliens use to file their federal income tax return.
The process of filing Form 8962 with your tax return is as follows:
- Attach Form 8962 to your tax return. Do not attach Form 1095-A to your tax return, but keep it for your records.
- Enter the amount of PTC from line 24 of Form 8962 on line 18e of Form 1040, Form 1040-SR, or Form 1040-NR. This is the amount of credit that you are claiming for the year.
- Enter the amount of excess advance payment of PTC from line 29 of Form 8962 on line 29 of Form 1040, Form 1040-SR, or line 30 of Form 1040-NR. This is the amount of advance payments that you have to repay, if any.
- If you have a negative amount on line 29 of Form 8962, enter it as a positive amount on line 19 of Form 1040, Form 1040-SR, or Line 20 of Form 1040-NR.
7. Keep Your Records
Some of the records that you should keep are:
- Your Form 1095-A and any corrected forms that you receive from the Marketplace.
- Your Form 8962 and any worksheets that you use to complete it.
- Your Form 1040, Form 1040-SR, or Form 1040-NR and any schedules or forms that you attach to it.
- Your proof of income, such as your W-2 forms, 1099 forms, pay stubs, or bank statements.
- Your proof of health insurance coverage, such as your insurance cards, policy statements, or enrollment confirmations.
- Your proof of changes in your circumstances, such as your marriage certificate, divorce decree, birth certificate, adoption papers, or court orders.
8. Know the Common Tips to Follow
To make the most of the PTC and avoid any problems or penalties, here are some common tips that you should follow :
- Enroll in a health plan through the Marketplace during the open enrollment period, which usually runs from November to December of each year.
- Report any changes in your income, family size, or enrollment status to the Marketplace as soon as possible.
- Choose the amount of advance payments of the PTC that you want to receive, if any.
Recap
To claim the PTC and enjoy the benefits of the ACA, you need to follow certain steps and file certain forms with your tax return. You also need to keep your records and report any changes in your circumstances to the Marketplace. By following the guidelines and tips in this article, you must be able to claim the PTC and file the forms with ease and confidence.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. . For comprehensive tax, legal or financial advice, always contact a qualified professional in your area. S’witty Kiwi assumes no liability for actions taken in reliance upon the information contained herein.
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