Health Insurance Tax Credits Explained

You’re probably wondering who qualifies for a tax credit. The government figures out who will qualify based on household income, household size, and age of household members. About 26 million Americans will qualify for health insurance tax credits. Generally, you are not eligible if your employer provides you affordable health insurance that includes a certain amount of coverage. Affordable is a key word — there’s actually a specific measurement for it under the Affordable Care Act (ACA). Be sure to ask your employer for more details. One more thing: If you’re eligible for Medicare or Medicaid, you’ll probably get your health coverage through those programs. People covered under Medicare or Medicaid typically don’t qualify for tax credits.

If you do qualify, how do you find out how much you’ll get? To predict your tax credit, go to an online estimator, like the one here on GetInsured. You’ll be asked to provide your estimate of household income. You’ll also be asked how many people are in your household, and how old they are. It takes only a minute or two to find out whether you’re likely to be eligible for tax credits or any other government assistance.

How the tax credit works

Health insurance tax credits help people pay their monthly health insurance premiums. Credits are paid in one of three ways:

1. The government can pay the tax credit directly to your insurance company — up front.

This means you’ll pay less of your monthly premium. (In some cases, the tax credit may be enough to pay your entire premium, so your monthly premium cost would be $0.)

2. You can receive it as a one-time credit on your next tax return.

In this case you’d pay the full premium all year. Then, when you file your taxes, you’d get a tax credit. If you owe income tax, the credit would be subtracted from what you owe — and you’d owe less. If you are receiving an income tax refund, the credit would be added to the refund amount and your refund check would be bigger.

3. Or you can do a little of both: Get some of your tax credits up front and some later.

Here’s how to do it: When you’re applying for tax credits, you’ll be asked how you want to receive them. You can opt to use some of your tax credits in advance, which the government will pay to your insurance carrier to reduce the cost of your premium, and get the rest of your tax credits when you file your taxes (use IRS Form 8962). You’ll see how to do this during the tax credit application process. If you need help, contact an approved Web broker like GetInsured.

Keep in mind: If your household income ends up being very different from what you estimated, your tax credits could change. If you lose your job or have an unexpected gap in income, or if your family size grows, your tax credit amount could go up. If you get a promotion or a new job with a big raise, your tax credit amount could go down.

Where to shop if you think you’ll get tax credits

If your initial calculation predicts that you’ll get a tax credit — or even that you’re close to qualifying — you’ll want to shop in a place that can help you access your credit. That way, if your income does change over the year, you’ll be able to get financial help.

You can access your tax credit three ways:

• Through select Web brokers. A few private companies have signed agreements with the federal government allowing them to help customers access tax credits. (GetInsured is one of those companies, and as an approved Web broker, we can help you access your tax credits. Know that not all Web brokers have this setup. You’ll want to double-check before shopping.)
• In your state’s marketplace. If your state has set up a state-based marketplace, you can shop there and access your tax credits.
• In the federal marketplace. The federal government has set up its own marketplace. If you live in a state that doesn’t have its own marketplace, you can shop on the federal site and access your tax credits that way.

Don’t get confused by various names for the tax credit!

You might hear it called different things: a premium credit, a premium subsidy, or — here’s a mouthful — the Advanced Premium Tax Credit (APTC for short). Not to worry, they all mean the same thing.