Healthcare.gov Premium Tax Credits and Filing Your 2020 Taxes

FYI, this blog post is most appropriate for those who accessed health insurance coverage through Healthcare.gov in 2020. If you started your Healthcare.gov coverage in 2021, this information does not apply.

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The reason health insurance on Healthcare.gov is so affordable for many people is because the government subsidizes your monthly premiums based on your income. These subsidies are also called Premium Tax Credits, and, if you receive them each month during the year, they are called Advance Payments of the Premium Tax Credit (APTCs). 

If you receive government subsidies, you need to reconcile these payments on your taxes each year. The IRS requires you to do this to make sure that you received the proper amount of subsidies based on your income.

Usually, 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 people with your income level should qualify for. When you file your taxes, you use Form 8962 to see how much premium tax credit you qualify for based on your actual year-end income. Then, you see how much APTC you actually received. If the amount you qualify for on Form 8962 is less than the amount you actually received during the year, then you need to repay the excess amount to the IRS.

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 have been covered by a Healthcare.gov plan and will show the amount of APTC that you was paid to your health insurance company on your behalf. The Marketplace also provides this information to the IRS.

What is the change for filing 2020 taxes? What do I need to do?

This year the IRS announced that you do not have to report excess APTCs when you file your 2020 taxes. So, when you are doing your calculations on Form 8962 and you discover that you received more subsidies than you actually ended up qualifying for, you do not need to pay back that excess amount this year. You do not need to report excess subsidies on your taxes for 2020.

If you find on Form 8962 that you actually received a smaller amount of subsidies than you qualify for based on your year-end income, you should definitely file form 8962 so you can get a tax refund.

What if I already filed my taxes?

If you already filed your taxes for 2020 and had to repay excess APTC, you do not need to file an amended tax return or contact the IRS. The IRS will reimburse you automatically. 

As a reminder, this change applies only to tax year 2020. The deadline to file your 2020 taxes is Monday, May 17, 2021.

Want to know more? Click here to read the IRS’ official announcement and fact sheet.