Premium Tax Credit: Claiming the credit and reconciling advance credit payments

When you enroll in coverage and request financial assistance, the Health Insurance Marketplace will estimate the amount of the premium tax credit you will be allowed for the year of coverage. To make this estimate, the Marketplace uses information you provide about:

• Your family composition
• Your household income
• Whether those you are enrolling are eligible for other non-Marketplace coverage

Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf. These payments – which are called advance payments of the premium tax credit or advance credit payments – lower what you pay out-of-pocket for your monthly premiums.

If you do not get advance credit payments, you will be responsible for paying the full monthly premium.

For tax years 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021, temporarily expanded eligibility for the premium tax credit by eliminating the rule that a taxpayer is not allowed a premium tax credit if his or her household income is above 400% of the federal poverty line.

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. A taxpayer's excess APTC is the amount by which the taxpayer's advance credit payments for the year of coverage exceed the premium tax credit the taxpayer is allowed for the year.

If you already filed a 2020 return and reported excess APTC or made an excess APTC repayment, you don't need to file an amended return or take any other action. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess APTC on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 for tax year 2020 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess APTC repayment amount to zero.

If you have not filed your 2020 tax return, here's what to do:

• If you have excess APTC for 2020, you are not required to report it on your 2020 tax return or file Form 8962, Premium Tax Credit (PTC).
• If you're claiming a net Premium Tax Credit for 2020, you must file Form 8962, Premium Tax Credit (PTC).

For details see the Tax Year 2020 Premium Tax Credit:

• Frequently Asked Questions
• Fact Sheet
• News Release

Filing a federal tax return to claim and reconcile the credit for tax years other than 2020

For tax years other than 2020, if advance payments of the premium tax credit were paid for you or someone else in your tax family (your tax family consists of every individual you claim on your tax return – yourself, your spouse if filing jointly, and your dependents), you must complete Form 8962, Premium Tax Credit (PTC) PDF and attach it to your return. You will receive Form 1095-A, Health Insurance Marketplace Statement, which provides you with information about your health care coverage. Use the information from Form 1095-A to complete Form 8962 to reconcile your advance payments of the premium tax credit with the premium tax credit you are allowed on your tax return. Filing your return without reconciling your advance credit payments will delay your refund. You must file an income tax return for this purpose even if you are not otherwise required to do so.

If you choose not to get advance credit payments, the full amount of the premium tax credit you are allowed will lower the amount of tax you owe for the year, or increase your refund to the extent your premium tax credit is more than the amount of tax you owe.

For tax years other than 2020, you must file a tax return if:

• You are claiming the premium tax credit.
• Advance credit payments were paid to your health insurer for you or someone else in your tax family. For purposes of the premium tax credit, your tax family is every individual you claim on your tax return – yourself, your spouse if filing jointly, and your dependents.
• Advance credit payments were paid for someone you told the Marketplace that you would include in your tax family for the year of coverage, if that individual was not included in any tax family

For information about how to fill out this form, see the Instructions for Form 8962. See Publication 974 for additional instructions for taxpayers in special situations.

Failing to file your tax return for tax years other than 2020 may prevent future advance credit payments

If advance credit payments are made for you or an individual in your tax family for coverage in a year other than 2020, and you do not file a tax return, you may not be eligible for advance credit payments in future years. This means you will be responsible for the full cost of your monthly premiums. In addition, you may have to pay back some or all of the advance credit payments made on behalf of you or an individual in your tax family.

Advance payments of the premium tax credit are reviewed in the fall by the Marketplace for the next calendar year as part of their annual enrollment process.

Reporting changes in circumstances

If you purchased health insurance coverage through the Marketplace and chose to receive the benefit of advance payments of the premium tax credit, it is important to report certain life events to the Marketplace throughout the year – these events are known as changes in circumstances.

If your household income goes up or the size of your household is smaller than you reported to the Marketplace - for example, because a son or daughter you thought would be your dependent will not be your dependent for the year of coverage - your advance credit payments may be more than the premium tax credit you are allowed for the year. If you report the change, the Marketplace can lower the amount of your advance credit payments. If you don't report the change and your advance credit payments are more than the premium tax credit you are allowed, you have to reduce your refund or increase the amount of tax you owe by all or a portion of the difference when you file your federal tax return.

If your household income goes down or you gain a household member, you could qualify for more advance credit payments than are now being paid for you. This could lower what you pay in monthly premiums. In addition, reporting your lower household income or new family member could reveal that you qualify for Medicaid or CHIP coverage that is less costly than your Marketplace plan.

Changes in circumstances that can affect the amount of your actual premium tax credit include:

• Increases or decreases in your household income. Events that could result in a significant increase to household income include:
  • Lump sum payments of Social Security benefits, including Social Security Disability Insurance payments
  • Lump sum taxable distributions from an individual retirement account or other retirement arrangement
  • Debt forgiveness or cancellation, such as the cancellation of credit card debt

  For the full list of changes you should report, visit HealthCare.gov.

  To estimate the effect that changes in your circumstances may have on the amount of premium tax credit that you can claim - see the Premium Tax Credit Change Estimator.

  How advance credit payments affect your refund

  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 on Form 1040, Schedule 3.

  For tax years other than 2020, if the advance credit payments are more than the amount of the premium tax credit you are allowed, called excess APTC, you will add all – or a portion of – the excess APTC to your tax liability on Form 1040, Schedule 2. This will result in either a smaller refund or a larger balance due.

  Repaying excess advance credit payments for tax years other than 2020

  The requirement to increase tax liability by all or a portion of excess advance credit payments does not apply for tax year 2020. In other years, the amount of your excess APTC that increases your tax liability may be limited if your household income is less than 400 percent of the applicable federal poverty line, but you will have to repay all of the excess APTC if your household income is 400 percent or more of the applicable federal poverty line.

  See the instructions for Form 8962, Premium Tax Credit (PTC), for information about excess APTC repayment limitations.

  If your filing status is Married Filing Separately, the repayment limitation for taxpayers with household income below 400 percent of the applicable federal poverty line applies to both spouses separately, based on the household income reported on each return.

  The Marketplace will send you a Health Insurance Marketplace statement, Form 1095-A, by January 31 of the year following the year of coverage. This form shows the amount of the premiums for your and your family's health care plans. This form also includes other information – such as advance credit payments made on your behalf – that you will need to compute your premium tax credit. For more information about Form 1095-A see Health Insurance Marketplace Statements.

  If you also receive Form 1095-B or 1095-C, which are unrelated to the Marketplace, see our questions and answers for information about how these forms affect your tax return.

  2020 unemployment compensation

  Under ARPA, eligible taxpayers are allowed to exclude up to $10,200 of unemployment compensation received in 2020 on their 2020 Form 1040, 1040-SR, or 1040-NR.

  Beginning in July 2021, the IRS reviewed tax returns filed prior to the enactment of ARPA to identify tax returns on which both excludible unemployment compensation and excess APTC repayments were reported by the taxpayer. Taxpayers received letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as a refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment. For taxpayers who reported both excludible unemployment income and APTC, the adjustment should have covered both items even though the IRS's communication to the taxpayer may have mentioned only unemployment compensation.

  However, if, because of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return for tax year 2020. See 2020 Unemployment Compensation Exclusion FAQs — Topic D: Amended Return (Form 1040-X) for more information.

  2021 unemployment compensation

  If you, or your spouse (if filing a joint return), received, or were approved to receive, unemployment compensation for any week beginning during 2021, the amount of your household income is considered to be no greater than 133% of the federal poverty line for your family size.

  Check the box on line A, above Part I of 2021 Form 8962, if you, or your spouse (if filing a joint return), received, or were approved to receive, unemployment compensation for any week beginning during 2021. By checking this box, you are certifying that you, or your spouse (if filing a joint return), received, or were approved to receive, unemployment compensation for any week beginning during 2021. For more information, see Publication 974 PDF . Keep any supporting documentation related to the receipt of or approval to receive unemployment compensation with your tax return records.