The advance premium tax credit (APTC) is based on information you provide about your estimated household size and projected income for the year you're applying for. When you file your federal income tax return for that year, you will have the actual numbers and will need to reconcile.
When you reconcile
- Take the amount of premium tax credit you used in advance during the year (paid directly to your health plan so your monthly payment was lower)
- Subtract the premium tax credit you actually qualify for based on your final income for the year
- Any difference between the two figures will determine your federal tax refund or tax owed
How to reconcile
- Get your Form 1095-A, which you receive in the mail or retrieved from healthcare.gov
- Print Form 8962
- Use the information from your Form 1095-A to complete Part II of Form 8962
After completing Form 8962, you will know if you used more or less premium tax credit than you qualified for based on your final yearly income.
Here's an example:
Anna and her husband, David, shop and apply for an Individual and family plan on the Marketplace. During enrollment, they entered their household size and estimated their income for the year they were shopping for. They found out right away that they qualified for a premium tax credit. They chose to use the advance premium tax credit, which was paid directly to their health plan and lowered their monthly premium payment.
Now it's time to file their yearly federal tax return.
Scenario 1: During the year, Anna got a promotion with a raise and David worked some overtime during the holidays. These increased their annual income, making it a little more than what they estimated it to be. When they filed their federal tax return, they completed Form 8962, where they put in their actual income.
It determined that their actual premium tax credit amount was less than the advance premium tax credit paid on their behalf–the credit was too much–so the difference will be subtracted from their refund or added to their balance due.
Scenario 2: David's boss decreased his hours during the summer and it lowered their annual income, making it less than what they estimated. When they filed their federal tax return, they completed Form 8962, where they put in their actual income.
It determined that their premium tax credit amount was more than the advance premium tax credit paid on their behalf–the credit wasn't enough–so the difference will increase their refund or reduce their balance due.
Reporting changes
If Anna had reported her raise to the Marketplace when it happened, their premium tax credit would have been adjusted based on their new household income. While it could mean a change in the advance premium tax credit paid to their health plan each month, when they reconciled their federal tax return, there may not be a balance owed.
Any life change, like household size or income, should be reported in your healthcare.gov account.