Make Less Than $98,400? The Government Might Pay for Your Health Insurance
Americans spend a staggeringly large percentage of their income on healthcare-related expenses , including health insurance. Luckily, if you meet certain requirements, the federal government will pay for part, or even all, of your premiums.
Introducing the premium tax credit
The premium tax credit is the government's way of subsidizing your health insurance. In order to claim this credit, you must:
- Buy your health insurance through one of the Affordable Care Act marketplaces;
- Not be eligible for employer-based health insurance or government-provided health coverage such as Medicare;
- Be within certain income limits (more on this in the next section);
- Not choose "married filing separately" as your tax filing status;
- Not be claimed as a dependent by another person; and
- Pay your insurance premiums.
There are two different ways to get the premium tax credit. First, you can get advance payments on the credit at the time you enroll in your health insurance plan for the year. If you choose this approach, you won't get the money directly; instead, your premiums will be lowered by the amount of your tax credit and the IRS will send this money to the insurance company to reimburse them for the difference. Second, you can wait to claim the credit until you file your tax return for the year, in which case you apply it to your return like any other tax credit . This is the best approach if you're not sure exactly what your income will be for the year (and therefore don't know exactly how much of a credit you're eligible for). To claim the premium tax credit on your return, you'll need to fill out Form 8962 to calculate the amount of the credit.
Your premium credit will be equal to the premium for the second-lowest-cost "silver" health insurance plan that's available to you through the Marketplace, minus a percentage of your household income (though it can never be greater than the amount you end up paying in health insurance premiums). The percentage of household income you'll have subtracted from your credit ranges from 2% (if you're between 100% and 133% of the federal poverty line for your family size) to 9.5% (if you're between 350% and 400% of the poverty line).
Most of the premium tax credit requirements are pretty simple, but the income requirement is rather more complicated. It's based not only on your household income, but also on the number of people in your household. To be eligible for this tax credit, your household income must be between 100% and 400% of the federal poverty level. If your income is below 100% of the FPL, you may qualify for an exception that will allow you to claim the credit anyway.
The income limits for 2017 are as follows (residents of Alaska and Hawaii use different numbers; see the Health and Human Services website for those figures):
Income Range (100%-400% of FPL)
$12,060 to $48,240
$16,240 to $64,960
$20,420 to $81,680
$24,600 to $98,400
If your household includes more than four people, add $4,180 to the lowest number of the four-person range for each extra person, then multiply the total by four to find the high end of the range for your household. For example, if you have a five-person household, add $4,180 to the $24,600 figure at the bottom of the four-person household range for a total of $28,780 as the low end of your income range; then multiply that number by four to get a total of $115,120 for the high end of your income range.
Mistakes with the advance credit
If you apply for the tax credit when you enroll in your health insurance plan, your advance tax credit will be based on the income estimate you provide at that time. If it turns out that your income estimate was wrong, you'll need to correct your premium tax credit amount on your tax return based on the actual income you received.
If you earned more money than you expected, you'll have to return part of your advance tax credit. You'll use parts II and III of Form 8962 to report how much your advance was and figure out how much you need to return. The returned credit will simply be added to your tax bill for the year and you can pay it as part of your overall tax return. If you earned less money than you expected, you're likely eligible for an additional premium tax credit. Again, filling out Form 8962 will allow you to calculate the size of your additional tax credit and add it to your tax return.
Form 8962 and its calculations are quite complicated, so unless you have a head for math, you'll probably want to hire a tax professional to do your tax return for you. At least that way you can be sure that all the numbers add up correctly.
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