The Affordable Care Act (ACA) includes numerous provisions that take effect between 2010 and 2020. One of these provisions is that Low-income individuals and families whose incomes are between 100% and 400% of the federal poverty level will receive federal subsidies on a sliding scale if they purchase insurance via an exchange
If you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the Premium Tax Credit. This tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes. The open enrollment period to purchase health insurance coverage through the Marketplace for 2014 ran from October 1, 2013 through March 31, 2014.
The Premium Tax Credit Eligibility
You may be eligible for the credit if you meet all of the following:
• buy health insurance through the Marketplace;
• are ineligible for coverage through an employer or government plan;
• are within certain income limits;
• do not file a Married Filing Separately return **
• you cannot be claimed as a dependent by another person.
**MFS permitted for domestic abuse victims. Learn more at IRS.gov/aca.
It’s Your Choice
If you are eligible for the credit, you can choose to:
Get the Credit Now: have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014, OR Get the Credit Later: wait to get the credit when you file your 2014 tax return in 2015.
Remember—you need to report any changes in circumstances If you receive advance payment of the premium tax credit to help pay for your insurance premiums, you should report changes such as income or family size (birth, death, adoption) to your marketplace when they happen in 2014. Reporting changes will make sure you get the correct amount of the advance payment of the credit. Receiving too much or too little in advance can affect your refund or balance due when you file your 2014 tax return in 2015. A reconciliation will need to be done at year end and remember that any excess will need to be repaid, or it will reduce any refund.
Claim the Credit
Whether you choose to get the credit now or later, you must claim it by filing a federal income tax return. To claim the credit you must file form 8885 with your 2014 form 1040 or 1040A. When you file your 2014 tax return in 2015, you will subtract the total of any advance payments you received during the year from the amount of the premium tax credit calculated on your tax return. This may affect your tax refund or balance due. If you are entitled to more credit than you have already received, this will either increase your refund or lower your balance due.