Four Things to Know about Advance Payments of the Premium Tax Credit

IRS Health Care Tax Tip 2015-76, November 19, 2015

When you enroll in coverage through the Marketplace during Open Season, which runs through Jan. 31, 2016, you can choose to have monthly advance credit payments sent directly to your insurer. If you get the benefit of advance credit payments in any amount, or if you plan to claim the premium tax credit, you must file a federal income tax return and use a Form 8962, Premium Tax Credit (PTC) PDF to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file an income tax return for this purpose even if you are otherwise not required to file a return.

Here are four things to know about advance payments of the premium tax credit:

• If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.
• If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return.  This will result in either a smaller refund or a larger balance due. 
• If advance credit payments are made on behalf of you or an individual in your family, and you do not file a tax return, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in future years. 
• The amount of excess advance credit payments that you are required to repay may be limited based on your household income and filing status.  If your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the advance credit payments. The repayment limits are listed in the table below.

Repayment Limitation Table

For more information, see the Premium Tax Credit Questions and Answers at IRS.gov/aca. You can also use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit.