health care reform

Premium Tax Credit

Share |

The premium tax credit will be calculated on the individual’s 2014 Federal tax return using a new credit form.

Since almost all individuals will receive this credit as an advance subsidy that will help pay for their health insurance premiums during 2014, the credit calculated on their 2014 Federal return will be reconciled with the subsidy amount that they received.

How the Premium Tax Credit Works:

  • The individual will receive a refundable credit if the premium tax credit is greater than the subsidy amount.
  • The individual will have to repay part of the subsidy amount they received during 2014 as an additional tax, if the premium tax credit is less than the subsidy amount.
    • The maximum repayment amount that an individual will be required to pay back ranges from $600 for married taxpayers ($300 for single) with household income under 200% of the Federal poverty level to $2,500 for married taxpayers ($1,125 for single) with household income between 301% to 400% of the Federal poverty level.

Other Things to Know About the Premium Tax Credit:

  • The advance subsidy (premium assistance subsidy) will be determined at the time the individual goes to the Exchange to enroll in a health insurance plan with the State Exchange. The premium assistance subsidy will be determined based on the individual’s income reported on their 2012 Federal return.
  • In order to ensure that the subsidy amount is as close to the actual premium tax credit that will be calculated on their 2014 Federal return, the individual will need to be sure that they stay in contact with their State’s Exchange and inform them if their income increases or they begin to receive health insurance coverage from their employer
    during 2014.
  • The credit is only available for individuals that have purchased their health insurance through a State Exchange and their 2014 household income is between 100% and 400% of the Federal poverty level.
  • The credit amount is equal to the difference between the total
    annual premium for the “benchmark plan” and the individual’s
    “expected contribution.”
  • The individual’s expected contribution is a specified percentage of their household income. The percentage is based on where the individual falls on the Federal poverty level as follows:
    • 9.5%: 300% - 400%
    • 8.05%: 250% to 300%
    • 6.3%: 200% to 250%
    • 4.0%: 150% to 200%
    • 3.0%: 133.01% to 150%
    • 2.0%: 100% to 133%
  • The benchmark plan is the second lowest cost (silver) plan’s premium at each State’s Exchange.

For more information click on the following links:

Training Video

TY 2013 Federal Tax Law Updates

Click on the button below to view a video presentation of the Federal Tax Law Updates that affect TY 2013.

Play Now