For the 2021 tax year,
you must repay the difference between the amount of premium tax credit you received and the amount you were eligible for
. There are also dollar caps on the amount of repayment if your income is below 4 times the poverty level.
Another way to avoid having to repay all or part of your premium assistance is to
elect to have all or part of your premium assistance sent to you as a tax refund when you file your tax return
, instead of paid in advance to your health insurer during the year.
For the 2021 and 2022 tax years, The American Rescue Plan expanded eligibility for premium tax credits to people at all income levels.
If your income for 2022 turns out to be greater than the amount you estimated when you sign up, you may have to repay some or all of the excess credit.
Tax Year 2020:
Requirement to repay excess advance payments of the premium tax credit is suspended
. ARPA suspended the requirement to repay excess advance payments of the premium tax credit (called excess APTC repayments) for tax year 2020.
How does a tax credit affect your tax return?
A tax credit
directly decreases the amount of tax you owe
. Common credits include the Earned Income Credit, American Opportunity Tax Credit, and the Savers Tax Credit. A credit can be nonrefundable or refundable. A nonrefundable credit lets you reduce your tax liability to zero (0).
The premium tax credit is
a refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace
, also known as the Exchange. The size of your premium tax credit is based on a sliding scale.
| Household Income Single All other filers | 300% – 400% FPL $1,350 $2,700 | Over 400% FPL No limit No limit |
|---|
The law extends eligibility to taxpayers with household income above 400 percent of the federal poverty line by lowering the upper premium contribution limit to
8.5 percent of household income
. All household income levels will experience a boost in premium credits for 2021 and 2022.
How do I opt out of tax credits?
If you want to stop advance payments of the 2021 child tax credit, you can opt-out
using the IRS's online portal before the monthly deadline
. Parents across the country have already received up to four monthly child tax credit payments.
If your income changes, or if you add or lose members of your household
, your premium tax credit will probably change too. It's very important to report income and household changes to the Marketplace as soon as possible.
How much of my tax credit should I use for health insurance?
Your tax credit would cap the cost of health insurance
between 2% and 9.5% of your annual household income
, depending on how much money you made relative to the FPL.
Will I get penalized if I underestimate my income for Obamacare?
It's normal for most people to overestimate or underestimate their ACA premium tax credit by a small amount.
There's no added penalty for taking extra subsidies
. The difference will be reflected in your tax payment or refund.
The self-employed health insurance deduction and premium tax credit
can work together
. If you do qualify for both, remember this key rule: Your combined insurance premium deductions and premium credits cannot be more than your total eligible insurance premiums. Computing these deductions can be a complex process.
Does a tax credit increase my refund?
Tax credits are always refundable or nonrefundable.
Nonrefundable tax credits can't increase your tax refund
— they can only reduce the amount you owe in taxes.
How does a tax credit work if I don't owe taxes?
Even with no taxes owed,
taxpayers can still apply any refundable credits they qualify for and receive the amount of the credit or credits as a refund
. For example, if you end up with no taxes due and you qualify for a $2,000 refundable tax credit, you will receive the entire $2,000 as a refund.
What is the difference between a tax credit and a tax rebate?
Tax credits apply to certain behaviors, such as purchasing an energy-efficient vehicle or buying a new home. Tax rebates are payments that the federal government makes following a tax period. Rebates give back a portion of the money taxpayers submitted earlier.
To be eligible for the premium tax credit,
your household income must be at least 100 percent and, for years other than 2021 and 2022, no more than 400 percent of the federal poverty line for your family size
, although there are two exceptions for individuals with household income below 100 percent of the applicable …
