When you apply for assistance to help pay the premiums for health coverage through the Health Insurance Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim. The Marketplace will use information you provide about your family composition, your projected household income, whether those that you are enrolling are eligible for other non-Marketplace coverage, and certain other information to estimate your credit.
Here are three things you should consider during the Health Insurance Marketplace Open Enrollment period:
1. Advance credit payments lower premiums - You can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit or advance credit payments. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
2. A tax return may be required - If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
3. Credit can be claimed at tax time - If you choose not to get advance credit payments, or get less than the full amount in advance, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.
For more information about open season enrollment, which runs through January 31, 2016, visit Healthcare.gov. See our Questions and Answers on IRS.gov/ca for information about the premium tax credit.
Jessica Clark has over 12 years experience in the accounting industry.