Don't Mess With Taxes

More than 21 million people selected a medical insurance policy using the Affordable Care Act (ACA) marketplace during the 2024 open enrollment period that ended in mid-January. The numbers should increase, as open enrollment continues in California, New Jersey, New York, Rhode Island, and Washington, D.C., through Jan. 31.

So far, this year's medical coverage enrollees include more than five million people, about a fourth of the 21.3 million total, who are new to ACA. Another 16 million people renewed their coverage to the plans, also still referred to by many as Obamacare.

While the sheer numbers indicate a diverse group of medical plan enrollees, many probably share one thing. They took advantage of the ACA government subsidy, the premium tax credit or PTC.

Tax help paying for health insurance: As a tax credit, the PTC provides a dollar-for-dollar reduction in your tax liability. And since it's a refundable tax credit, it's even better. Any excess PTC you have after offsetting the tax you owe comes back to you as a tax refund. The PTC is available to households with incomes between 100 percent and 400 percent of the federal poverty level (FPL).

The credit helps qualifying ACA enrollees cover some, and in certain instances all, of the cost of policies purchased through the insurance marketplace.

The IRS' online Premium Tax Credit Change Estimator can give you an idea of your expected health care coverage credit. KFF, which was formerly known as The Kaiser Family Foundation and is a nonprofit health policy research organization, also has a Health Insurance Marketplace Calculator that's updated with 2024 plan information.

And, of course, the federal marketplace HealthCare.gov (and most state marketplaces) will help enrollees find a plan and determine how much premium credit might apply. That way, the PTC is factored in upfront, reducing monthly premiums.

More tax forms, too: Of course, at tax filing time, you'll have to reconcile the advance premium tax credit you got, which is basically an estimate, with your actual tax data you enter on your return. That's done by filing Form 8962, Premium Tax Credit.

To complete Form 8962, you'll need the information on Form 1095-A, Health Insurance Marketplace Statement, which you should receive by the end of the month if it hasn't already arrived.

That's an excerpt of a blank Form 1095-A below. Your copy will have information on the medical insurance policy you purchased and the covered individuals.

Click here to see the full Form 1095-A, and here to see the form instructions.
See more tax forms and more about them at Tax Forms 2024.

Form 1095-A shows the months of coverage purchased through the Marketplace and any advance PTC paid to your insurance company to help cover your monthly premium.

If, based on the Form 1095-A info and your other tax return data, Form 8962 shows your PTC amount is more than the advance you got when you purchased ACA coverage, you get the excess refundable credit dollars to claim against your tax bill. Again, if it's more than you owe, you get it as a tax refund.

But if your final PTC calculation on your tax return shows you got too much credit in advance, you must repay all or part of the excess.

More PTC info: You can find more on the PTC at these IRS.gov pages and publications: The Premium Tax Credit - The Basics; IRS Publication 974, Premium Tax Credit (PTC); IRS Publication 5120, Premium Tax Credit fact sheet; IRS Publication 5195, The Premium Tax Credit and Your Tax Return fact sheet; and Eligibility for the Premium Tax Credit.

Yeah, claiming the PTC is more tax work. But as the latest ACA enrollment figures show, millions of folks are willing to do the extra math — or, in most cases, have their tax software or tax preparer run the numbers — in order to get medical coverage they can, with some tax help, afford.

You also might find these items of interest:

• More states now offer health care marketplaces
• Tax statements you need to file your 2023 return
• IRS announces high-deductible health plan, HSA & HRA inflation bumps for 2024

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