The health insurance marketplace is still a fairly new process and regardless of how much has been written about it, argued about it, taught about it, and talked about it, most people who participate in the marketplace have no idea the who, what, when, how, and why of how it actually works. One of the most confusing aspects of the marketplace is the premium tax credit.
The availability of the premium tax credit is determined based on a taxpayers income as reported on their prior year income tax return. If you have misrepresented your income or if you experience changes in the current tax season that change your tax situation for the current tax year, you may be required to pay back a portion or all of the premium tax credit you enjoyed. It is important to represent your income accurately and to report life changes immediately so as not to be in a situation to pay back the credit when you file in April.
What life changes can impact this credit?
The IRS has developed a Premium Tax Credit Estimator to help you determine how some of the life changes listed above can impact your credit. The estimator does NOT report anything to the IRS. It is a taxpayer planning tool only.
This is such a confusing topic and continues to wreak havoc with taxpayers. If you need help deciphering how the premium tax credit impacts you, call us at 361-578-7333.