Health insurance can be expensive. But thanks to Obamacare, people who otherwise can’t get affordable coverage from their employer can buy insurance through an exchange and take advantage of the premium tax credit (PTC) to lower premiums. The PTC is about to celebrate its 10th anniversary, and it has grown since its inception. The recently passed Inflation Reduction Act preserved a 2021 and 2022 expansion of the PTC for three years, through 2025, just in time for open enrollment, which begins November 1. Not only will more people continue to qualify for the PTC, but larger credits remain in place for many.
Who can benefit from a health loan?
Prior to 2021, the PTC was available to people with household incomes between 100% and 400% of the poverty line who purchased health coverage through an exchange. If you enroll for 2023, these income levels range from $13,950 to $55,800 for single people and $27,750 to $111,000 for a family of four (the figures are higher for residents of Alaska and Hawaii). From 2021 to 2025, people with income above 400% of the poverty line who sign up for coverage through an exchange also get PTCs to the extent that their cost exceeds 8.5% of income .
People eligible for Health Insurance, Medicaid, Tricare, or any other federal, state, or local government insurance are not eligible for PTC. The same goes for people who are offered affordable health insurance through their employer. Employer coverage is considered affordable if the employee’s share of annual premiums for personal coverage does not exceed 9.12% of household income (9.61% for 2022). For years, this same self-test also applied to determine the affordability of an employee’s spouse and children, but President Biden’s administration changed that rule. It recently released final rules that determine affordability for family members based on the employee’s share of the cost of family coverage under the employer plan. This change will be in place for the opening registration open for 2023.
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How does the premium tax credit work?
Credit is estimated when you go to the stock market to buy insurance. The estimated PTC for 2023 is based on your expected earnings for 2023. Start with your adjusted adjusted gross income for 2021, which is AGI plus non-taxable interest, non-taxable Social Security benefits, and any taxes.
exempt foreign labor income. Then add or subtract any change in income you expect to have for 2023.
The size of the PTC will be related to the premium of the second cheapest Silver plan available to you, minus your expected contribution amount, which is based on your household’s modified AGI. The lower your modified AGI, the greater the PTC. You can choose to have the PTC paid in advance directly to the health insurance fund to lower your monthly premiums.
If you get coverage through an exchange and choose to pay the PTC to the insurer, you must file a federal income tax return for that year and report the PTC, even though your income may be below the reporting threshold or if you expect a refund. . You will need to attach Form 8962 to your Form 1040 to calculate the actual PTC, list the prepayments made to the insurer, and
reconcile the two numbers. If the PTC exceeds the installments, you can claim the excess as a refundable credit on the 1040. If the PTC is less than the advances, most people will have to repay some or all of the excess. Before filing your return, be sure to accurately report all information and verify that you qualify for the PTC. The IRS is on the lookout for people who receive TPC prepayments and fail to file returns or report TPC in error.
If you opt for PTC advance payments, notify the exchange of any changes that may affect the amount of PTC, such as a change in income, employment, marital status, or dependents. When you enroll in an insurance plan through an exchange, your estimated income is used to determine your PTC. If you realize later that your income for the year will be higher or lower than you originally estimated, let the exchange know as soon as possible. It will then be ei
then decrease or increase PTC advances for the rest of the year. This will save you a nasty surprise when you file your tax return next year.
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