What is Premium Tax Credit (PTC)?

Premium Tax Credit 2019: is a refundable form of tax credit that eligible households receive from the Internal Revenue Service (IRS) in the United States. The premium tax credit offsets the monthly health insurance premium costs for eligible households who have purchased their insurance via the Healthcare Exchange Marketplace.

The ACA’s Premium Tax Credit

People with adjusted gross income from 100 to 400 percent of federal poverty level (in the 48 states and DC, where ACA has expanded Medicaid) are eligible to utilize this subsidy. Moreover, only those individuals buying health insurance via government-run health insurance exchange are qualified to receive this subsidy.

[It is important to note that the premium tax credit can be accessed by lawfully present recent immigrants in the United States whose income falls below the poverty level. ACA added this provision since recent immigrants are not permitted to utilize Medicaid until they live in the US for at least five years.]

How Premium Tax Credit Works?

You can choose to pay the PTC subsidy in advance directly to your health insurance company every month if you qualify for it or you can pay it as a lump sum amount with your federal income tax refund. In any case, you get it back even if you owe higher amount in federal taxes.

Who is Eligible?

You must meet all of the following eligibility criteria in order to access the premium tax credit:

  1. Your income must be within a certain range (elaborated further below).
  2. Coverage must originate via Marketplace.
  3. You are not eligible if you are covered by your employer or a government health plan.
  4. You cannot be a dependent.
  5. A joint tax return must be filed by you and your spouse, if you’re married.

Eligible Income Ranges

As mentioned above, people with adjusted gross income not exceeding 400 percent of the federal poverty level with at least 100 percent of the poverty level (139 percent in states with expanded Medicaid) are entitled to the premium tax credit.

Federal poverty level varies from year to year and is based on your family size.

Eligibility for the premium tax credit can be determined using the previous year’s FPL values. For instance, FPL numbers of year 2017 will be used by anyone applying for 2018 coverage.

Using 2017 FPL levels:

  • With an income level of $12,060-$48,240, you can qualify for the health insurance subsidy of premium tax credit (the lower threshold is $16,643 if you’re in a state that has expanded Medicaid).
  • Couples qualify with an income of $16,240-$64,960 (the lower threshold is $22,412 if you’re in a state that has expanded Medicaid).
  • A family of three earning $20,420-$81,680 qualifies (the lower threshold is $28,180 if you’re in a state that has expanded Medicaid).

You must know certain points in order to figure out how much your premium tax credit will be”.

  1. Depending on your income, your expected contribution towards the total cost of your health insurance.
  2. The cost of your benchmark health plan (This is the silver-tiered health plan has the second lowest monthly premiums in your area. You can gather more information about the plan and its cost from your health insurance exchange.)

How to Claim Premium Tax Credit 2019?

Your choice of receiving the premium tax credit influences how you report it on your return.

  • The premium tax credit will be subtracted from the credit you are eligible to receive on your tax return; if you chose to receive the tax credit in advance (some individuals do this to reduce the cost of insurance).
  • However, if you received lesser credit in advance that you were eligible for, then your tax refund will include this amount or any other tax you owe may be reduced.
  • Sometimes, in case your income goes up during the year; there is a possibility of receiving more credit than you deserve. In such cases, you must “repay” the over-payment in your tax return.
  • If you wish to maximize your refund or lower the tax you owe, you can choose to get your premium tax credit at the time of tax filing by claiming the full calculated amount.

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