The Taxpayer Advocate Service developed the Premium Tax Credit Change Estimator to help you estimate how your premium tax credit will change if your income or family size change during the year.
What is the Estimator?
When your life changes, the amount of your premium tax credit might change, too. Life changes can affect the amount of your premium tax credit but will not affect your advance payments of the credit, which is an estimation of your premium tax credit, unless you notify the Marketplace of the change.
For example, if you estimate your income will be $25,000 for the year but you get a new job that increases your income to $30,000, your advance payments of the credit may be too high. Your premium tax credit may be less than your advance credit payments resulting in additional tax liability to you. To prevent that, notify the Marketplace of the change.
Remember: this tool only gives you an estimate. Your premium tax credit is calculated on your tax return using Form 8962.
This estimator does not estimate premium tax credit changes when:
- You move to a different ZIP code.
- You marry or divorce.
What is the Credit?
The premium tax credit is a tax credit established by the Affordable Care Act. If you get your health insurance coverage through a state or the federal Health Insurance Marketplace you may be eligible. The credit can help make health insurance more affordable to you and your family.
In general, you may be eligible for the credit if:
- You enroll in a qualified health plan through the Marketplace for a member of your family (you, your spouse or your dependents),
- For the same months your enrolled in Marketplace coverage, one or more of the enrolled family members is ineligible for other coverage - such as through an employer or government plan,
- Your household income is at least 100% and no more than 400% of the federal poverty line for your family size,
- If you are married, you file a joint return with your spouse. However, if you are a victim of domestic violence or spousal abandonment, you may be able to file as married filing separate, and
- You cannot be claimed as a dependent by another person.
For more information about the requirements, visit the Premium Tax Credit page at IRS.gov. You can also read IRS Publication 5120.
How does the premium tax credit work?
You may elect to have advance payments of the credit paid directly to your insurance provider – this will help offset premium costs. Then when you file your tax return, list the advance payments and reconcile them with the actual credit amount.
You may also choose not to have advance payments and receive the premium assistance provided by the credit all at once when you file your return.
In both cases, you will need to claim the credit on your tax return.
The credit is based on your:
- Total household income for the year,
- Family size (you, your spouse, and dependents),
- Filing status,
- Address, and
- The number and ages of the family members who are enrolled and are not eligible for other health coverage.
How does the Marketplace determine my credit?
If you choose to take advance payments of the credit, the Marketplace determines your eligibility for advance payments of the credit using projections of your income and number of personal exemptions (you, your spouse, and dependents) when you enroll in a qualified health plan.
If this information changes during the year and you don't notify the Marketplace, the amount of the advance payments of the credit may be substantially different from the amount of the premium tax credit you take on your tax return.
What types of changes can affect my credit?
Changes in circumstances that can affect the amount of your premium tax credit include:
- Changes in your household income,
- Birth or adoption,
- Marriage or divorce,
- Moving to a different address,
- Gaining or losing eligibility for other health care coverage, and
- Other changes affecting income and your family.
Information You Need to Use the Estimator
You need to provide:
- An estimate of your monthly income,
- Your family size (includes you, your spouse and your dependents),
- The age of each family member enrolled in Marketplace coverage and whether they are eligible for coverage outside of the Marketplace (for example: coverage through an employer, Medicare, or Medicaid),
- Your expected filing status,
- The state and county where you live,
- The cost of the benchmark plan used in calculating your advance credit payments if you live in a state that is not participating in the federal Marketplace at Healthcare.gov,
- The monthly premium for the health insurance in which you are enrolled, and
- The monthly advance premium credit payments for your coverage (if any).
If you live in a state that is participating in the federal Marketplace, the estimator can provide an estimate of your benchmark plan amount. If you received a different benchmark amount from Healthcare.gov, use that figure instead.
This estimator only provides an estimate of the changes to the premium tax credit. It does not calculate the actual credit.