How To Reconcile Premium Tax Credit? (TOP 5 Tips)

To reconcile, you compare two amounts: the premium tax credit you used in advance during the year; and the amount of tax credit you qualify for based on your final income. You’ll use IRS Form 8962 to do this. If you used more premium tax credit than you qualify for, you’ll pay the difference with your federal taxes.

Do I have to pay back my PTC?

If you end up earning more than what you stated on your application, you may have to pay some or all of the premium assistance you received during the year back at tax time. There are limits to the amount you may need to repay, depending on your income.

How can I avoid paying back my premium tax credit?

The easiest way to avoid having to repay a credit is to update the marketplace when you have any life changes. Life changes influence your estimated household income, your family size, and your credit amount. So, the sooner you can update the marketplace, the better. This ensures you receive the correct amount.

What does it mean to reconcile APTC?

If you had a Marketplace plan and used advance payments of the premium tax credit (APTC) to lower your monthly payment, you’ll have to “reconcile” when you file your federal taxes. This means you’ll compare 2 figures: The amount of premium tax credit you used in advance during the year.

Do I have to pay back the premium tax credit in 2021?

For the 2021 tax year, you must repay the difference between the amount of premium tax credit you received and the amount you were eligible for. There are also dollar caps on the amount of repayment if your income is below 4 times the poverty level.

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What happens if I don’t file Form 8962?

What if I file but don’t include Form 8962? For any year when you received advanced premium tax credits, you are required to file a federal income tax return, including Form 8962. If you fail to do this — it is called “ failure to reconcile ” — you may be unable to apply for premium tax credits for the following year.

Do I have to pay back the premium tax credit in 2022?

If your income for 2022 turns out to be greater than the amount you estimated when you sign up, you may have to repay some or all of the excess credit. But, when you file your 2022 return, your actual income turns out to be 410% FPL and you would only be eligible for a $3,100 tax credit based on that income.

What happens if I underestimate my income for Marketplace insurance?

You’ll make additional payments on your taxes if you underestimated your income, but still fall within range. Fortunately, subsidy clawback limits apply in 2022 if you got extra subsidies. in 2021 However, your liability is capped between 100% and 400% of the FPL. This cap ranges from $650 to $2,700 based on income.

What are examples of refundable tax credits?

Common refundable tax credits include:

  • American opportunity tax credit. Available to filers who paid qualified higher education expenses.
  • Earned income tax credit. Paid to eligible moderate- and low-income working taxpayers.
  • Child tax credit.
  • Premium tax credit.

What happens if you don’t reconcile APTC?

Consequences of Not Reconciling APTC If APTC is paid on behalf of someone in their family and the tax filer does not file a tax return and reconcile that APTC with IRS Form 8962, they will not be eligible for APTC or cost-sharing reductions (CSRs) to help pay for their Marketplace coverage in future years.

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