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Health insurance on Healthcare.gov is affordable for many people because the government subsidizes your monthly premiums based on your income. These subsidies are called Premium Tax Credits. If you receive them each month during the year, they are called Advance Payments of the Premium Tax Credit (APTCs).
If you receive these government subsidies, you need to reconcile these payments on your tax return each year. The IRS requires you to do this to make sure that you received the proper amount of subsidies based on your income.
Use Form 8962 to see how much premium tax credit you qualify for based on your actual year-end income. If your income at the end of the year is higher than you estimated on your Healthcare.gov application, you will need to pay back some of your subsidies. This is because you were given more subsidies than you were qualified for, based on your annual income.
If your income at the end of the year is lower than you estimated on your Healthcare.gov application, you may be eligible for a refund. Use form 8962 to claim the Premium Tax Credit.
How do I know if I received APTCs?
If you enrolled yourself or a family member in a Healthcare.gov plan, you will receive Form 1095-A from the Health Insurance Marketplace. This form will show the months that you were covered by a Healthcare.gov plan and will show the amount of APTC that was paid to your health insurance company on your behalf. The Marketplace also provides this information to the IRS.
Are there changes for filing taxes in 2021? What do I need to do?
Last year the IRS announced individuals didn’t need to repay excess APTCs for tax year 2020. This is not the case for 2021 tax return. If you received excess APTCs in 2021, you will be required to pay these back when you file your tax return.
If you find on Form 8962 that you received a smaller amount of subsidies than you qualify for based on your year-end income, you may claim the Premium Tax Credit on form 8962.
As a reminder, this change applies only to tax year 2020. The deadline to file your 2021 federal income tax return is April 18, 2022. If you do not reconcile your APTCs by filing your 1095-A on your 2021 tax return, you run the risk of not being eligible for APTC in future years.
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