All About APTC: What It Is, Who Gets It, & What to Do at Tax Time

Some people can use advance payments of their PTC (APTC) to lower their premiums (monthly insurance payments) when they enroll in a plan through the Health Insurance Marketplace®.

• The APTC is based on the estimated annual household income and the household size reported on the Marketplace application.
• The PTC is determined after the end of the year based on the actual household income and household size for the year at tax filing.
• Depending on the actual household income for the year, individuals may be required to repay excess APTC received when filing their federal income tax return.

If you are eligible for advance payments of the premium tax credit (APTC), you have the option to use all, some, or none of the amount to reduce your monthly premiums. If you use any of it at all, you will need to file a tax return, even if you wouldn’t necessarily have to otherwise.

Advance Payments of the Premium Tax Credit (APTC) and Cost-Sharing Reductions (CSRs) Overview | CMS

• Will have an annual household income that falls within 100 to 400% of the federal poverty level (FPL);
• Will not file a Married Filing Separately federal income tax return;
  • Exception: You may qualify for a special rule that allows certain victims of domestic abuse and spousal abandonment to claim the PTC using the Married Filing Separately filing status when they file their federal income tax returns. If this applies to you, you should attest that you are single when filling out your application.
  • Note: If you are legally married but live separately from your spouse for at least six months of the year of coverage, and for more than half of that year live with a tax dependent in a home that you pay more than half of the cost of, you may be eligible to file your federal income tax return as “Head of Household” and won’t have to miss out on eligibility for APTC and PTC due to filing status.
• Will file a federal income tax return or be claimed as a tax filer’s dependent;
• Will be enrolled in coverage (excluding Catastrophic coverage) through a Marketplace for one or more months of the year; and
• Must not be eligible for or enrolled in other minimum essential coverage (MEC). For example:
  • Not offered “affordable” coverage through an eligible employer-sponsored plan that provides minimum value or enrolled in employer-sponsored coverage (ESC), regardless of affordability or provision of minimum value.
  • Not eligible for qualifying coverage through a government program like Medicaid, Medicare, the Children’s Health Insurance Program (CHIP), or TRICARE.

Determining the amount of APTC:

When you apply for Marketplace coverage, the Marketplace will estimate the amount of PTC that you may be able to claim for the tax year using information you provide about:

• Household size
• Projected household income
• Your/your family members’ eligibility for other, non-Marketplace coverage options described earlier.

Based upon that estimate, you can decide if you want to have all, some, or none of your estimated PTC paid in advance as APTC directly to your insurance company to lower your monthly premiums.

If you choose to have APTC paid on your behalf to help with the cost of Marketplace coverage, you will be required to file a federal income tax return for the year of coverage.

• IRS Form 8962 will also need to be filed with the federal income tax return to reconcile the amount of APTC paid on your behalf with the PTC that you may claim at tax filing based on your actual household income for the year and household size at the end of the year.

If you choose not to use APTC or the Marketplace determines you’re not eligible for APTC at the time of enrollment, you may still be eligible for the PTC when you file your federal income tax return for the year.

• If so, you must file IRS Form 8962 to claim the PTC, which will lower the amount of taxes owed on that return or increase their refund.

If you have an offer of employer-sponsored health coverage, you won’t qualify for APTC or CSRs on a Marketplace plan if:

• Your offer of employer-sponsored coverage meets the minimum value standard; AND
• Your offer of employer-sponsored coverage is considered affordable. (For 2024, a plan is considered “affordable” if the plan’s premiums do not exceed 8.39% of the employee’s household income.)

This calculator can help estimate premiums and subsidies for coverage through the Marketplace:
Health Insurance Marketplace Calculator | KFF

Example of how much the APTC can help reduce the monthly cost of insurance

Here is a breakdown of the average cost of health insurance in Texas based on last year's Open Enrollment Period:

• $123/mo. - Average premium after subsidy
• $783/mo. - Average government subsidy
• $1307 - Average deductible
• $3214 - Average out-of-pocket max

SOURCE: https://www.healthbird.com/states/tx

This calculator can help estimate premiums and subsidies for coverage through the Marketplace:
Health Insurance Marketplace Calculator | KFF

If you had a Marketplace plan and chose to have APTC paid to your insurer to lower your monthly premium payment, you must “reconcile” when you file your federal taxes.

This means you’ll compare two figures:

• The amount of APTC paid on your behalf or any other member of your tax family for the year of coverage. This was paid directly to your health plan issuer to lower your monthly payment.
• The PTC you actually qualify for based on your actual household income, household size, and other items that determine your PTC for the year.

Any difference between the two figures may affect your federal income tax refund or the amount of federal income tax owed.

In case that didn’t make sense, here’s how the Centers for Medicare & Medicaid Services explains it:

You should be aware that the amount of APTC paid on your behalf will affect the amount you owe or the amount of your refund when you file your federal income tax return. If you receive APTC, you must file a federal income tax return and include IRS Form 8962, Premium Tax Credit (PTC), even if you are not otherwise required to file taxes. Each year, Marketplace enrollees will receive Form 1095-A: Health Insurance Marketplace Statement, which contains information about Marketplace plans any member of the tax household had during the year.

You will use information from Form 1095-A to file IRS Form 8962.

Your maximum APTC amount was determined based on your projected household income and size. However, you must use your actual household income and family size to calculate the premium tax credit (PTC) when filing your federal income tax return. If your actual household income differs from the projected household income amount, this may affect the amount you will pay or receive as a credit or refund when filing your federal income tax return. If you will have an uncertain or variable income, you may want to think about the idea of applying only part of the premium tax credit for which you are eligible as an advance payment. This may reduce the amount of money you owe at tax filing time in the event your actual income is higher than anticipated.

If your actual household income is less than you projected when you submitted your Marketplace application, or if you did not apply all of the APTC for which you were eligible when you enrolled in a QHP, your premium tax credit will likely be more than your APTC. In that case, you will get a credit or a refund for the difference when you file a federal income tax return for the year.

Repayments of excess APTC are limited to amounts based on your household income and household size. You can find current information on repayment limits in IRS Form 8962 – Premium Tax Credit (PTC) instructions

If your actual household income is below 100 percent of the FPL, you may still be able to claim the premium tax credit at tax time if you were enrolled in a Marketplace plan with APTC and expected a household income equal to or above 100 percent of the FPL when you initially enrolled in the plan, and did not intentionally misrepresent your income to the Marketplace. However, for the next plan year, you will not be eligible for APTC if your household income for the next plan year is expected to remain below 100 percent of the FPL.

For more information, view Questions and answers on the Premium Tax Credit | Internal Revenue Service

SOURCES:

• https://www.cms.gov/files/document/taxes-exemptions-reconciling-advance-payments-premium-tax-credit-and-failure-file-and-reconcile.pdf
• https://www.healthcare.gov/taxes-reconciling/

If you purchase coverage through the Marketplace, you should receive Form 1095-A, Health Insurance Marketplace® Statement, from the Marketplace by early February of the year after the year of coverage.

If this form shows that APTC was paid on behalf of you or a member of your family, the household’s tax filer is generally required to file a federal income tax return for the year of coverage and complete IRS Form 8962, Premium Tax Credit, to “reconcile” those advance payments. 

CMS will resume Failure to Reconcile (FTR) operations in Fall 2024 with the start of OE (open enrollment) 2025, and, effective January 1, 2025, enrollees who have failed to file and reconcile for tax years 2022 and 2023 will no longer be eligible for APTC.

If you have a two-tax year FTR status and have, in fact, filed and reconciled but IRS data has not yet updated, you can attest to filing and reconciling on your Marketplace application during OE in order to remain eligible for APTC for PY 2025. The Marketplace will then recheck your attestation to see if you have filed and reconciled during the FTR Recheck process, which typically occurs sometime after OE ends annually on January 15.

How to reconcile your premium tax credit | HealthCare.gov

If you have questions about the information on Form 1095-A or about receiving Form 1095-A, you should contact the Marketplace directly.

If APTC is paid on your behalf or on the behalf of another individual in your tax household and the APTC is not reconciled on a completed Form 8962 with a federal income tax return filed by you (or someone else such as a tax filer who claims you as a dependent) for two consecutive years, you will not be eligible for APTC or income-based CSRs to help pay for your Marketplace coverage in future years. This means that you will be responsible for the full cost of your monthly premiums.

Form 1095-A provides information you’ll need when completing IRS Form 8962.

About Form 1095-A, Health Insurance Marketplace Statement | Internal Revenue Service

Note: If you had a Marketplace plan WITHOUT the premium tax credit (PTC):

You should get your 1095-A form by mail no later than mid-February. (It may be available in your Marketplace account from mid-January to February 1.) Once you have it, follow the steps presented next. You must file a federal tax return for 2024 — even if you usually don't file or your income is below the level requiring you to.

For the steps to find/get your 1095-A form and what to do next if you paid full price, check out Marketplace plan with no premium tax credits | HealthCare.gov

IMPORTANT: Don’t file your 2024 taxes until you have an accurate 1095-A.

The actual PTC for the year will differ from the APTC amount estimated by the Marketplace if your household size or annual household income as estimated at the time of enrollment is different from the household size or annual household income you report on your federal income tax return. The more your household size or annual household income differs from the Marketplace estimates used to compute your APTC, the more significant the difference will be between your APTC and your actual PTC.

This is why it’s important to report changes to household income and household size to the Marketplace promptly.

Other changes in circumstances, such as marriage or divorce, may also affect the difference between APTC and the PTC.

• If the actual PTC on your return is less than the APTC paid on your behalf, the difference will be subtracted from your refund or added to your balance due (subject to certain repayment caps).
• If your actual PTC is more than the APTC paid on your behalf, the difference will increase your refund or reduce your balance due.

When you notify the Marketplace about changes in circumstances as soon as they occur, it allows the Marketplace to redetermine your eligibility for APTC and allows you to adjust the amount of APTC you apply to your premium. This adjustment may decrease the likelihood of a significant difference between your APTC and your actual PTC.

Changes in circumstances that can affect the amount of actual PTC include:

• Increases or decreases in their household income (e.g., a lump sum payment of Social Security benefits or taxable distributions from an individual retirement account or other retirement arrangement, or different employment)
• Marriage
• Divorce
• Birth or adoption of a child
• Other changes to household composition
• Gaining or losing eligibility for government-sponsored or employer-sponsored health care coverage
• Moving to another address

SOURCE: https://www.cms.gov/marketplace/technical-assistance-resources/aptc-csr-basics.pdf

You will report changes to the Marketplace by updating your application, and you can do this online, by phone, or in person, but you CANNOT do this by mail.

NOTE: If you’ve moved but are in the same state, follow the instructions provided below. However, if you’ve moved to another state, you will need to start a new application. To learn what to do if you’ve moved out of the state where you originally applied, check out How to report a move to the Marketplace | HealthCare.gov

Update your application online

To update your application, you'll navigate through your existing application and make edits. When you do, you'll be prompted to re-submit your application. This is the correct next step, and won't cause any disruption with your current coverage.

Get screen-by-screen uploading directions, with pictures (PDF, 398 KB), or follow these steps:

1. Log in to your HealthCare.gov account.
2. Choose the application you want to update.
3. Click "Report a Life Change" on the left-hand menu.
4. Read through the list of changes, and click "Report a Life Change" to get started.
5. Select the kind of change you want to report.
6. Navigate through your application and report any changes to your income, household members, or address; new health coverage offers; and other information.
7. After you’re done, you’ll get new eligibility results explaining your options to change plans.

Important: Complete all steps on your To-Do List
In order for your changes to take effect, you must complete all steps on your To-Do list — including, if you’re given the option, completing your enrollment.

Update your application by phone

Contact the Marketplace Call Center (800-318-2596) and a representative can help you update your application.

Update your application with in-person help

Find someone in your community who can work with you to help make changes to your application.

There are certain questions you should direct to the IRS about your coverage status and how Marketplace financial assistance will affect your tax filing.

The IRS will handle consumer questions regarding:

• Help filing taxes
• Help paying taxes owed to the IRS
• Questions related to tax filing, such as:
  • How long can I delay filing?
  • What happens if I don’t file?
  • I filed my taxes prior to getting Form 1095-A
  • How do I amend my tax return?
• Questions on how to complete Form 8962, Premium Tax Credit
• Questions about other tax forms
• Tax assistance (including Free File, which forms to fill out, where to get assistance with tax filing, and what the tax-filing deadline is).
  Free File:
  https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

Tax guides and tools

Guide to using Form 1095-A

IRS information on Form 1095-A

Health coverage tax tool (use only if your second lower cost Silver plan is missing or wrong)

Find help preparing and filing your taxes. Protect yourself from tax scams.

Tax forms and instructions

Form 1040, U.S. Individual Income Tax Return (PDF, 159 KB) 

Form 1040 instructions (PDF, 4.2 MB)

Form 8962, Premium Tax Credit (PDF, 115 KB)

Form 8962 instructions (PDF, 348 KB)

LINKS SOURCE:

Marketplace plan with no premium tax credits | HealthCare.gov