What is the Premium Tax Credit (PTC), and how does it relate to Tax Form 8962?
Do you know about the Premium Tax Credit?
The Premium Tax Credit was developed in 2014 as a way to help people pay for health insurance. It offers tax deductions that can be applied when filing taxes, but only those who qualify are eligible to receive these benefits.
Do you know about the Tax Form 8962?
Form 8962 is a tax document that comes into play when individuals attempt to claim a deduction from the cost of health insurance purchased through the National Health Insurance Marketplace. This form records and reports related data about the tax deduction.
In 2009, the Affordable Care Act brought about the premium tax credit for those who meet certain requirements. Filing a tax return with its associated document, IRS From 8962, is essential in order to receive this refundable credit.
What is the premium tax credit?
Are you aware of the premium tax credit? This refundable tax credit is an excellent way to help reduce the costs associated with enrolling in a health plan through the Health Insurance Marketplace. The premium tax credit offers a great opportunity to lower your insurance premiums significantly.
Estimating one’s yearly income and receiving the advance premium tax credit when applying for health coverage in the Marketplace is possible. Alternatively, this same credit may be claimed on the tax return after filing with the actual income being reported.
When applying to a Marketplace, you must list your household information and estimated income. Depending on this data, you may qualify for a premium tax credit. Those whose estimated income is between 100%-400% of their federal poverty level entitlement can claim it. This credit can be utilized in advance to lower monthly premiums and make saving money easier.
When preparing your Form 1040 during tax season, you may find a discrepancy between the premium tax credit you used throughout the year and your final taxable income. Should you be in the situation of having taken more of the premium tax credit than necessary, then it will need to be repaid. On the other hand, should you have used less of it than was available, the difference will be sent to you as a refundable credit on your return.
When filing your Form 1040 for tax year 2020, the American Rescue Plan Act of 2021 made a noteworthy change – suspending the requirement to return any surplus of the advance payments of the Premium Tax Credit. To be eligible for this credit, certain criteria must be met.
See if you are eligible for the premium tax credit to qualify:
In order to obtain the premium tax credit, certain conditions must be met.
In order to be eligible for the premium tax credit, there are certain criteria that must be met. Primarily, your income should fall within an established range. For example, an individual cannot be claimed as a dependent on someone else’s return in order to qualify.
These consist of obtaining medical insurance through the Marketplace. Also includes not being eligible for health care coverage through other means, such as an employer-sponsored plan or government program.
For couples they must comply with a few requirements. Most notably, married individuals must file a joint return.
Adjustments to salary and the size of your family may influence your eligibility for a tax credit, so make sure to inform the Marketplace. The premium tax credit program considers the federal poverty line when establishing what range of incomes can apply for the credit.
According to a report from America’s U.S. Department of Health and Human Services, yearly federal poverty levels fluctuate with one’s place of residence. This span is set from 100% all they way up to 400%, corresponding to family size and current tax year circumstances.
To gauge full eligibility to claim the premium tax credit, those who earn between $15,000 and $50,000 in 2022 should examine Form 8962. A family of four that makes between $30,000 and $110,000 annually can also qualify. Although income is one important factor to consider, it is not the only requirement to meet eligibility standards.
What is Tax Form 8962?
Are you aware of Tax Form 8962? It is required for those who have purchased health insurance from Healthcare.gov or your state healthcare marketplace. People living in states with their own marketplaces must use the form to report their premium tax credit information.
Completing the tax form 8962 requires two key steps:
- Assessing whether you qualify for the credit.
- Filing for the premium tax credit.
Determining your eligibility for the credit and understanding whether you qualify for the premium tax credit can be done by completing Form 8962. This form is also used to balance any advanced payments with the amount of credit that might be owed to you.
To begin with, by taking your family income and tax family size into consideration, this form will determine how much you contribute for each year and month. Your tax family is normally composed of both yourself and your partner when filing a joint return and any dependents who are part of your home. All income of anybody in your family or household must be included.
Once the information has been completed and your designated federal poverty level has been calculated, you can determine how much tax credit you are entitled to. The amount of this credit can be applied in two ways: as a reduction on your health insurance premiums or as a reduction on taxes when completing a return.
When selecting the monthly payments option, you can use the government subsidizing your insurer, which will help reduce your monthly premium costs. Additionally, Form 8962 permits you to assess how much of the premium tax credit has been used and calculate your remaining available balance.
At tax time, you can claim the refundable premium tax credit. This is a tax credit that may be applied against your tax liability in order to reduce your overall taxes. When claiming the credit, be aware that should you have overestimated your income, it can mean more money was paid out by the government than what was due. In this case, you will need to pay back the difference when filing your taxes.
After you have bought health insurance from the Marketplace, it is important to be aware of any changes to your family size and income that can have an effect on your eligibility for a premium tax credit. Such changes may differ from what was initially projected upon submitting the Marketplace application.
At the end of the year, you might find yourself with remaining credit or an obligation to reimburse some of your credit. To provide relief, the American Rescue Plan Act of 2021 established that there is no need to remit any extra money for 2020’s Premium Tax Credit advance payments.
To Sum It All Up on Premium Tax Credit
Based on household size, those with an estimated income ranging from 100% to 400% of the federal poverty level may qualify you for a Premium Tax Credit (PTC) when purchasing health insurance through the National Health Insurance Marketplace.
The Premium Tax Credit is a great opportunity for eligible individuals to save money on their health insurance premiums. Individuals can reduce the amount they pay each year or claim full credit when filing their taxes.
To determine whether the Premium Tax Credit (PTC) applies to your situation, use IRS Form 8962. Depending on your eligibility, an additional payment or a refundable credit might come into play when filing taxes.
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