Jane Dotson
The Health Insurance Marketplace is a platform where individuals can review health care coverage options and purchase insurance. If you obtained your health insurance from the Marketplace, it is likely to have an impact on your tax return. This is because your reported income determines the cost of your insurance, and you may also be eligible for certain Marketplace health coverage tax credits based on your income. When you file your tax return, you will need to reconcile your advance payments with the premium tax credit you compute for your tax return. If you received too much, you will typically need to pay it back, and if you received too little, you may be eligible for the rest as a refundable tax credit.
| Characteristics | Values |
|---|---|
| If you purchased health care insurance through the Marketplace | You should receive a Form 1095-A, Health Insurance Marketplace Statement |
| Form 1095-A includes | The total monthly health insurance premiums paid to the insurance company, the amount of premium assistance received in the form of advance payments of the premium tax credit |
| If Form 1095-A shows | Coverage for you and your family for the entire year, check the full-year coverage box on your tax return |
| If you chose to have advance payments of the premium tax credit paid directly to your insurance company | You must complete Form 8962, Premium Tax Credit and file a federal income tax return, even if you are otherwise not required to file |
| You will | Substantially increase your chances of avoiding a gap in receiving this help if you electronically file your tax return with Form 8962 by the due date of your return |
| If you had Marketplace coverage at any point during 2024 | You must file your taxes and reconcile using IRS Form 8962 to find out if you used the right amount of premium tax credit during the year |
| If you had Marketplace coverage but didn't use the premium tax credit | A tax credit you can use to lower your monthly insurance payment (your “premium”) |
| If you obtain your health insurance from the Health Insurance Marketplace | You may be eligible to receive a tax credit to offset some of your premium payments |
| If you qualify for the premium tax credit | You may also be eligible for the Advance Premium Tax Credit, which reduces your health insurance premiums throughout the year |
| If you received too much premium tax credit through 'advance payments' | You will typically need to pay it back |
| If you received too little premium tax credit | You may be eligible to receive the rest of it as a refundable tax credit |
| For tax years before 2019 | If you choose not to purchase health insurance coverage, you’re required to make an individual shared responsibility payment with your tax return |
| If the APTC paid to health care providers were more than the premium tax credit (excess APTC) | The taxpayer must pay all or part of the excess APTC with their tax return, except for tax year 2020 |
| If you had Marketplace coverage but didn't get the benefit of APTC | You may claim the premium tax credit when you file your return |
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What You'll Learn
Tax credits and how they affect your premium payments
If you obtain your health insurance from the Health Insurance Marketplace, you may be eligible to receive a tax credit to offset some of your premium payments. This is known as the Premium Tax Credit and is determined by the information on your tax return. The amount of the Premium Tax Credit you may receive depends on your income and the cost of Marketplace health plans in your area. The Marketplace will determine the expected contribution you are required to pay toward the premium for a mid-range (Silver) benchmark plan.
If you qualify for the Premium Tax Credit, you may also be eligible for the Advance Premium Tax Credit, which reduces your health insurance premiums throughout the year. This is a monthly reduction of your health insurance premiums rather than waiting until you file your tax return to get the premium tax credit. Most people who are eligible for the Premium Tax Credit are also eligible for the Advance Premium Tax Credit.
If you receive too much Premium Tax Credit through advance payments, you will typically need to pay it back. If you receive too little, then you may be eligible to receive the rest as a refundable tax credit. You can use Form 8962 to find out if you used the right amount of Premium Tax Credit during the year. You can also use this form to compare the advance amount you used to the amount you qualify for based on your final income.
For tax years other than 2020, if your household income reported on your tax return is 400% of the FPL (which is based on household income and family size) or higher, you must repay the full amount of APTC that exceeds your Premium Tax Credit.
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The Health Insurance Marketplace Form 1095-A
If you purchased health care insurance through the Health Insurance Marketplace, you should receive a Form 1095-A, Health Insurance Marketplace Statement, at the beginning of the tax-filing season. Form 1095-A is used to report certain information about individuals who enrol in a qualified health plan through the Health Insurance Marketplace. The form includes information for only the months you had a Marketplace plan.
Form 1095-A will help you complete your federal individual income tax return. It reports the total monthly health insurance premiums paid to the insurance company you selected through the Marketplace. It also lists the amount of premium assistance received in the form of advance payments of the premium tax credit that were paid directly to your insurance company, if any.
If you received advance payments of the premium tax credit, you must complete Form 8962, Premium Tax Credit, and file a federal income tax return, even if you are otherwise not required to file. You must reconcile these payments with the premium tax credit you compute for your tax return. If you used too much, you'll repay it via taxes. If you used too little, you can claim the difference as a credit.
If you receive Form 1095-A with incorrect information, you can contact the Marketplace Call Center to get a corrected form. You may need to file an amended return using the information on your corrected 1095-A.
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How to file your tax return with Form 8962
If you purchased health insurance through the Health Insurance Marketplace, you may be eligible to receive a premium tax credit to offset some of your premium payments. This credit is determined by the information on your tax return. If you chose to have advance payments of the premium tax credit paid directly to your insurance company, you must complete Form 8962, Premium Tax Credit, and file a federal income tax return. Here is a step-by-step guide on how to file your tax return with Form 8962:
- Obtain Form 1095-A: At the beginning of the tax filing season, you should receive Form 1095-A, the Health Insurance Marketplace Statement. This form outlines your coverage, the total monthly health insurance premiums paid to your insurance company, and any advance payments of the premium tax credit. If you enrolled in a Marketplace plan and set up a HealthCare.gov account, you can access Form 1095-A online. It should be available by mid-February and can be found by logging into your account, selecting your application, and then selecting "Tax Forms".
- Calculate Your Premium Tax Credit (PTC): Use Form 1095-A to help you calculate your PTC. This calculation will determine if you received the correct amount of premium tax credit during the year. Compare the advance amount you received to the amount you qualify for based on your final income.
- Reconcile Your Premium Tax Credit: If you received advance payments of the premium tax credit, you must reconcile these payments with your calculated PTC. If you received too much, you will generally need to pay it back via taxes. If you received too little, you may be eligible to claim the difference as a refundable tax credit.
- Complete and Submit Form 8962: Along with your tax return, you must submit Form 8962, Premium Tax Credit. This form allows you to report any excess or insufficient premium tax credit amounts. If you do not include Form 8962 with your tax return, you may need to resubmit your return. You can increase your chances of avoiding delays by electronically filing Form 8962 by the due date.
It is important to note that if you purchased health insurance through the Marketplace, your income tax return can help in paying for that coverage. Additionally, if you chose not to purchase health insurance coverage for tax years before 2019, you may be required to make an individual shared responsibility payment with your tax return.
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The Advance Premium Tax Credit (APTC)
When enrolling in Marketplace insurance, individuals can choose to have the Marketplace compute an estimated credit that is paid directly to their insurance company to lower their monthly premium payments (APTC). Alternatively, they can choose to receive the full benefit of the credit when they file their tax return for the year.
If an individual chooses to receive APTC, they must complete Form 8962, Premium Tax Credit, and file a federal income tax return. They will need to reconcile the advance payments with the actual credit they compute on their tax return. This involves comparing the advance amount they received to the amount they qualify for based on their final income. If they received too much APTC, they will generally need to repay it via taxes. If they received too little, they can claim the difference as a refundable tax credit.
It is important to note that certain life changes, such as changes in household income or family size, may affect the amount of APTC an individual receives. These changes should be reported promptly to the Marketplace as they occur to ensure that individuals receive the proper type and amount of financial assistance.
For the tax year 2020, the requirement to repay excess APTC was suspended. Taxpayers who had already repaid excess APTC for that year were reimbursed by the IRS.
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The Affordable Care Act and individual shared responsibility payments
The Affordable Care Act mandates that everyone must have health insurance coverage. This can be achieved through one of three means:
- Qualifying health insurance coverage: This is the most common option, where individuals have health insurance coverage for each month of the year. This can be indicated by checking a box on the tax return form.
- Exemption from the requirement to have coverage: Some taxpayers may need to file a Form 8965 to claim an exemption from the requirement to have health care coverage.
- Individual shared responsibility payment: If an individual chooses not to purchase health insurance coverage, they are required to make this payment with their tax return. The payment amount is determined as either a percentage of the declared income on the tax return or a flat dollar amount. For example, the 2018 individual shared responsibility payment was calculated as the greater of $695 per adult and $347.50 per child, with a maximum amount of $2,085, or 2.5% of the household income above a certain threshold.
It is important to note that the Affordable Care Act and the individual shared responsibility payments are interconnected. The Act outlines the requirement for health insurance coverage, and the individual shared responsibility payment is the consequence for not meeting that requirement.
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Frequently asked questions
Form 1095-A is a Health Insurance Marketplace Statement that provides information about the Marketplace plans that any member of your household had in the previous year. It is used to complete your federal individual income tax return.
If anyone in your household had a Marketplace plan in the previous year, you should receive Form 1095-A by mail no later than mid-February. It may also be available in your Marketplace account from mid-January to February 1.
If there is incorrect information on your Form 1095-A, you should contact the Marketplace Call Center. You may need to file an amended return using the information on a corrected Form 1095-A.
Form 8962, Premium Tax Credit, is used to reconcile the amount of premium tax credit you received during the year with the amount you qualify for based on your final income. This form must be filed with your federal income tax return.
If you received too much premium tax credit, you will typically need to pay it back via taxes. If you received too little, you may be eligible to receive the rest as a refundable tax credit.
