Published on: October 31, 2020 Last modified: November 24, 2020

The Advance Premium Tax Credit (APTC): Who’s Eligible and How to Apply

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    As a United States taxpayer, you may be eligible for a variety of types of tax credits — such as the Advance Premium Tax Credit — without even realizing it. Although not everyone qualifies for most types of tax credits, taking advantage of anything for which you are eligible can have a significant impact on the amount that you owe the Internal Revenue Service (IRS). This guide will help you understand what the Advance Premium Tax Credit is, whether you are eligible for it, and how to claim it. 

    What Is the Advance Premium Tax Credit? 

    The Advance Premium Tax Credit is one of several that you may be eligible for depending on your current health insurance. Here are some facts to keep in mind:

    • The Advance Premium Tax Credit is part of the Affordable Care Act (enacted in 2010), and was created to help those for whom the act may create more challenges than solutions. 
    • This credit is used to help you cover your health insurance plan’s monthly premium payments. 
    • Although health insurance is intended to make your life easier by making care more affordable, it can have the opposite effect for people with low incomes. 
    • High monthly payments can have a detrimental effect on your budget if they are higher than you can reasonably afford to pay based on your current income and expenses.
    people eligible for advance premium tax credit

    Knowing whether you qualify for the Advance Premium Tax Credit can help, especially if you are struggling to pay your premiums or are looking for ways to make your health insurance plan more affordable. 

    Who Qualifies for the Advance Premium Tax Credit? 

    Although every individual or family’s current financial situation is unique, there are a few basic guidelines that most applicants will need to meet to qualify for the Advance Premium Tax Credit. Your income needs to fall into a certain range, for example, plus you need to have a qualifying type of health insurance and your status when filing your tax return must meet other basic requirements. 

    1. Income Requirements

    Because the Advance Premium Tax Credit is intended to benefit families and individuals that most need assistance covering their monthly health insurance premiums, those with especially high incomes are usually not eligible. In general, you will be eligible for this credit if your total annual income falls between 100 and 400 percent of the federal poverty line for the number of people in your family. There are exceptions that may help you qualify if your total annual income is below 100 percent of the poverty line. 

    2. Health Insurance Requirements

    At least one member of your family must have been enrolled in Marketplace coverage for at least one month of the year for which you are applying for the Advance Premium Tax Credit. This type of coverage is generally used by individuals or families that are not eligible for health insurance through their place of employment. You will not be eligible for this type of tax credit if the only health insurance plan you participated in during the calendar year for which you are considering applying was not included in the Marketplace.

    At least one full month of premiums must also have been paid before you file your tax return. This does not need to be paid out-of-pocket, however, as it can be covered by a previous Advance Premium Tax Credit and it is also acceptable for it to have been paid by someone else.

    3. Tax Return Requirements

    Although health insurance and income requirements are the most important qualifications, there are other things to consider when filing your tax return to make sure you qualify for the Advance Premium Tax Credit. In most circumstances, you will not be able to file your tax returns as married filing separately, and you cannot be claimed as a dependent to be eligible, either.    

    How Do I Get My Advance Premium Tax Credit?

    Claiming your Advance Premium Tax Credit is relatively simple, but here are the things you need to keep in mind about the process:

    • You will need to submit Form 8962 with your regular tax return, which can be done either electronically or by mail. 
    • This form allows you to submit details about your income, family size, type of health insurance, and other important information to determine the amount of credit for which you are eligible. 
    • This information is used to claim your premium credit and reconcile, or adjust, the amount you will receive based on changes to your finances from the previous year. 
    woman filing form 8962 and applying for the advance premium tax credit

    You will also need to file a full tax return in order to get the Advance Premium Tax Credit, even if your income or other circumstances would otherwise not require you to do so. 

    Other Important Things to Know

    One of the most important things to be aware of when applying for the Advance Premium Tax Credit is that you will not actually receive the money, as the IRS pays it directly to your health insurance company. The amount you receive in a given year may change when you file the next year’s tax return, too, especially if your income changes significantly. This can lead to receiving a credit that is too large or small for your current financial situation, which will have an impact on the total amount of your tax bill for the year. 

    Where Can I Get Help Claiming My Advance Premium Tax Credit?

    At Silver Tax Group, we are here to help our clients understand and claim the Advance Premium Tax Credit and others for which they may be eligible to get the most from their tax returns. This credit was designed for a specific type of health insurance and income level, but it can make a significant difference in helping you pay high premiums that may otherwise not fit into your budget. 

    Contact us today to speak with our experts about any questions you may have about the Advance Premium Tax Credit!

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