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New For 2014 Taxes: Health Premium Tax Credit

premium tax credit could be used for drugsWe knew when Obamacare went into place that there would be new requirements for income tax filing, and one of the first to deal with is the health premium tax credit. This will require the use of a new form, Form 8962.

Health Premium Tax Credit

For this tax credit you will need to reconcile your advance credits that you have received in the form of reduced subsidized healthcare premiums.

When you signed up for health insurance through the ACA marketplace you had the opportunity to receive advance credit, depending upon your income, which reduced your premiums. When the tax year has been completed, you need to compare your Modified Adjusted Gross Income (MAGI) to the Federal Poverty Line (FPL) to ensure that your MAGI is between 100% and 400% of the FPL.

If your MAGI is greater than 400% (4 times) the FPL, you are not eligible for the premium tax credit. If you have received advance premium tax credit, you’ll need to pay it back. If it’s less than 400% of the FPL, you are eligible, but you’ll have to run the calculations to determine if you’ve received the appropriate amount of advance credit, too much, or too little.

Obviously if you have received too much credit, just the same as if your MAGI was greater than 400% of the FPL, you have to pay back the excess credit you’ve received. If you have received too little credit, this will reduce your other tax payable or increase your refund for the tax year.

These differences could occur if you’ve had a change in your circumstances during the tax year – change in family size, increase or decrease in family income, marriage, divorce, change of address, or change in employment status (gaining or losing eligibility employer-sponsored health coverage).

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