If you purchased health insurance through the Health Insurance Marketplace (also known as the Exchange), you may be eligible for the Premium Tax Credit (PTC) to help pay for your coverage.
The Requirement to Reconcile
If you received “advance” payments of the credit (APTC) to lower your monthly insurance premiums, you must file a tax return to reconcile those payments, even if you otherwise wouldn’t have to file.
- Form 1095-A: You will receive this form from the Marketplace. It lists your enrollment premiums and the advance payments made on your behalf.
- Form 8962: You use the information from Form 1095-A to complete Form 8962 (Premium Tax Credit) on your tax return. This form compares the advance payments you received with the actual credit you qualify for based on your final yearly income.
- Refund: If your actual credit is larger than the advance payments, you get the difference as a refund.
- Repayment: If your advance payments were more than your actual credit (e.g., your income was higher than estimated), you may have to repay some or all of the excess.
Understanding the “Second Lowest Cost Silver Plan” (SLCSP)
The amount of your tax credit is based on the price of the Second Lowest Cost Silver Plan (SLCSP) available in your area for your “coverage family”.
- This figure is usually found in Column B of your Form 1095-A.
- Why it matters: Your credit is calculated to cover the cost of this benchmark plan minus your “expected contribution” (a percentage of your income). If you choose a more expensive plan, you pay the difference. If you choose a cheaper plan, your credit covers more of the cost.
- Missing or Incorrect SLCSP: If Column B is blank or you had a change in your household that wasn’t reported to the Marketplace, you may need to look up the correct SLCSP premium using the IRS Tax Tool.
Official IRS Resource:The Premium Tax Credit – The Basics
