Health Insurance Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange (also known as a Health Insurance Marketplace Covered CA).
The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums.
On May 18, 2012, the Department of the Treasury and the IRS issued final regulations, which provide guidance for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit, and for Marketplaces that make qualified health plans available to individuals and employers.
On Jan. 30, 2013, the Department of the Treasury and IRS released final regulations on the premium tax credit affordability test for related individuals. On April 30, 2013, the Department of the Treasury and the IRS issued proposed regulations relating to minimum value of eligible sponsored plans and other rules regarding the premium tax credit.
Additionally, Notice 2013-41, issued on June 26, 2013, provides information for determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high-risk pool programs MR. Mip. This determination will affect whether the individual is eligible for the premium tax credit. On May 2, 2014, the Department of the Treasury and IRS issued final regulations on the reporting requirements for Marketplaces. Notice 2014-23 was issued on March 26, 2014, and allows certain victims of domestic abuse to claim the premium tax credit while filing a return using the Married Filing Separately filing status for the 2014 calendar year.
How Your Income Affects Your Premium Tax Credit
You are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent of the federal poverty line for your family size. An individual who meets these income requirements must also meet other eligibility criteria.
The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes. Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess. If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf. You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.
For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line:
|Federal Poverty Line for 2014 Returns|
|100% of FPL||.||400% of FPL|
|One Individual||$11,490||up to||$45,960|
|Family of two||$15,510||up to||$62,040|
|Family of four||$23,550||up to||$94,200|
The Department of Health and Human Services provides three federal poverty guidelines: one for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines. You can find all of this information on the HHS website.
Use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit. For more information, see the instructions to Form 8962 and the Questions and Answers on the Premium Tax Credit on IRS.gov/aca.
Tax-filing Extension Expires Oct. 15 for Millions of Taxpayers; Check Eligibility for Overlooked Tax Benefits
IRS YouTube Videos:
- Oct. 15 Tax Deadline: English | Spanish | ASL
- IRS Tax Payment Options: English | Spanish | ASL
- IRS2Go 5.2: English | Spanish | ASL
- Online Payment Agreement: English | Spanish | ASL
WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax benefits and then file their returns electronically using IRS e-file or the Free File system.
About a quarter of the 13 million taxpayers who requested an automatic six-month extension this year have yet to file. Although Oct. 15 is the last day for most people, some still have more time, including members of the military and others serving in combat zone localities who typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.
“If you still need to file, don’t forget that you can still file electronically through October 15,” said IRS Commissioner John Koskinen. “Many people may not realize they may be eligible to use Free File available on IRS.gov/freefile. Free File is free tax software that takes the guesswork out of return preparation. Even if you’re filing in the final days, filing electronically remains easy, safe and the most accurate way to file your taxes.”
Check Out Tax Benefits
Before filing, the IRS encourages taxpayers to take a moment to see if they qualify for these and other often-overlooked credits and deductions:
- Benefits for low-and moderate-income workers and families, especially the Earned Income Tax Credit. The special EITC Assistant can help taxpayers see if they’re eligible.
- Savers credit, claimed on Form 8880, for low-and moderate-income workers who contributed to a retirement plan, such as an IRA or 401(k).
- American Opportunity Tax Credit, claimed on Form 8863, and other education tax benefits for parents and college students.
Health Care Tax Reporting
While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2014, there are also new lines on Forms 1040, 1040A and 1040EZ related to the health care law. Visit IRS.gov/aca for details on how the Affordable Care Act affects the 2014 return. This includes:
- Reporting health insurance coverage.
- Claiming an exemption from the coverage requirement.
- Making an individual shared responsibility payment.
- Claiming the premium tax credit.
- Reconciling advance payments of the premium tax credit. Properly doing so can help maintain continued eligibility for premium assistance in 2016.
The Interactive Tax Assistant tool can also help determine if a taxpayer qualifies for an exemption, needs to make a payment or is eligible for the premium tax credit.
Taxpayers who intend to claim the Health Coverage Tax Credit for 2014 must first file an original 2014 tax return without claiming the HCTC, even if they have no other filing requirement . They can then file an amended return when the IRS issues further HCTC guidance. Visit irs.gov/hctc for updates.
E-file Now: It’s Fast, Easy and Often Free
The IRS urges taxpayers to choose the speed and convenience of electronic filing. Fast, accurate and secure, filing electronically is an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. Of the nearly 144 million returns received by the IRS so far this year, about 86 percent or over 124 million have been e-filed.
Taxpayers who purchase their own software can also choose to e-file, and most paid tax preparers are now required to file their clients’ returns electronically.
Everyone can use Free File, either the brand-name software, offered by the IRS’s commercial partners to individuals and families with incomes of $60,000 or less, or online fillable forms, the electronic version of IRS paper forms available to taxpayers at all income levels.
Join the eight in 10 taxpayers who get their refunds faster by using direct deposit and e-file. Taxpayers can choose to have their refunds deposited into as many as three accounts. See Form 8888 for details.
Quick and Easy Payment Options
The IRS Direct Pay system offers taxpayers the fastest and easiest way to pay what they owe. Available through the Pay Your Tax Bill icon on IRS.gov, this free online system allows individuals to securely pay their tax bills or make quarterly estimated tax payments directly from checking or savings accounts without any fees or pre-registration. So far this year, more than 4.1 million tax payments totaling over $15 billion have been received from individual taxpayers through Direct Pay.
Taxpayers can also pay by debit or credit card. While the IRS does not charge a fee for this service, the payment processer will. Other e-pay options include the Electronic Federal Tax Payment System (pre-registration is required) and Electronic Funds Withdrawal which is available when e-Filing. Taxpayers can even e-pay what they owe using, IRS2Go , the agency’s popular mobile phone app. All of the electronic payment options are quick, easy and secure and much faster than mailing in a check or money order. Those choosing to pay by check or money order should make the payment out to the “United States Treasury.”
Taxpayers with extensions should file their returns by Oct. 15, even if they can’t pay the full amount due. By doing so, taxpayers will avoid the late-filing penalty, normally five percent per month, that would otherwise apply to any unpaid balance after Oct. 15. However, interest, currently at the rate of 3 percent per year compounded daily, and late-payment penalties, normally 0.5 percent per month, will continue to accrue.
Fresh Start for Struggling Taxpayers
In many cases, those struggling to pay taxes qualify for one of several relief programs. Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months or request a short-term payment plan. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS.
Taxpayers can also request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.
Alternatively, some struggling taxpayers qualify for an Offer-in-Compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.
Details on all filing and payment options are on IRS.gov.
Other pages in this section
- Affordable Health Coverage? 9.66% Employee ONLY
- IRS Summary
- Lawsuit over spending not authorized HR 3762
- Medi Cal – Income Drop? Tax or Subsidy Pay Back?
- Premium Subsidy Now or Tax Time?
- Subsidies in Federal Exchange Upheld – King v Burwell
- Technical Regulations