Taxpayers use Form 8962 to calculate the Premium Tax Credit (PTC). The amount of the PTC is then reconciled with any Advanced Payment of a Premium Tax Credit (APTC).
Because a taxpayer qualifies for the PTC for health insurance purchased exclusively through the Health Insurance Marketplace (or Exchange), he or she will complete Form 8962 only for health insurance coverage purchased in this manner. Primarily, a health insurance plan purchased through the Marketplace is defined as a plan purchased on HealthCare.gov or through an individual State Marketplace or Exchange.
If a taxpayer, or member of the taxpayer's family, enrolled in a health insurance plan through the Marketplace, he or she will receive Form 1095-A, Health Insurance Marketplace Statement. The 1095-A lists the months of coverage that were purchased through the Marketplace as well as any APTC. The APTC is paid to the health insurance provider to help with the monthly premium amount. If any APTC was paid, or if the taxpayer wishes to claim the PTC, he or she must file Form 8962.
If the APTC is more than the calculated PTC, the taxpayer must repay any excess, subject to certain limitations. If the APTC is less than the PTC, the taxpayer may receive a credit for the difference, reducing any taxes due or increasing the refund.
Information Prior to the 2018 Tax Year
The premium tax credit is a refundable tax credit available to certain individuals that purchased affordable health insurance through the Health Insurance Marketplace. The size of the premium tax credit is based on a sliding scale and it is available primarily to taxpayers whose household income falls within a range that is set each year.
Those who have lower income may receive a larger credit to help cover the cost of their insurance. When an individual enrolls for insurance through the Marketplace, they can choose to have the Marketplace compute an estimated credit that is paid to the insurance company to lower what the individual pays for their monthly premiums (advance payments of the premium tax credit, or APTC). Or, the individual can choose to get all of the benefit of the credit when they file their tax return for the year. If the taxpayer chooses to have advance payments of the premium tax credit made on their behalf, they must reconcile the amount paid in advance with the actual credit that is computed when they file their tax return. Either way, the the taxpayer must complete Form 8962, Premium Tax Credit (PTC) and attach it to their tax return for the year.
In general, individuals and families may be eligible for the premium tax credit if their household income for the year is at least 100 percent but no more than 400 percent of the federal poverty line for their family size. The federal poverty guidelines — sometimes referred to as the “federal poverty line” or FPL — state an income amount that is considered poverty level for the year based on family size. The Department of Health and Human Services (HHS) determines the federal poverty guideline amounts annually. The government generally adjusts the income limits annually for inflation. The Federal Register publishes a chart reflecting these amounts at the beginning of each calendar year. HHS provides three federal poverty guidelines: one for residents of the 48 contiguous states and D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of federal poverty guidelines on the first day of the annual open enrollment period.
See here for the current and prior year poverty guidelines.
If the household income exceeds 400% of the ranges for the taxpayer's family, no Premium Tax Credit is allowed and any taxpayer that received an Advanced Premium Tax Credit when they purchased minimum essential health coverage through the Marketplace or state exchange will be required to repay the APTC when they file their their tax return.
For Premium Tax Credit purposes, Household income is the modified adjusted gross income of the taxpayer and their spouse (if filing a joint return), plus the modified adjusted gross income of each individual in their tax family for whom they can claim as a dependent and who is required to file an income tax return because his or her income meets the income tax return filing threshold. Household income does not include the modified adjusted gross income of those individuals whom are not claimed as dependents and who are filing a tax return only to claim a refund of withheld income tax or estimated tax. For purposes of the Premium Tax Credit, modified adjusted gross income is the adjusted gross income on the tax return plus certain income that is not subject to tax (foreign earned income, tax-exempt interest, and the portion of social security benefits that is not taxable). A taxpayer who includes the gross income of a dependent child on their tax return must also include the child’s tax-exempt interest and the portion of the child’s social security benefits that is not taxable.
IRS: Instructions for Form 8962