Health insurance premiums can be expensive, but thankfully there is a tax credit that can help offset the cost for moderate income families. There are three requirements that must be fulfilled in order to claim the premium tax credit:
- Health insurance coverage must be obtained through the Health Insurance Marketplace. You can choose a plan during open enrollment, which runs from November 15, 2014 through February 15, 2015.
- Your total household income needs to fall between one and four times the federal poverty line. The base income for a four person family for the 2014 tax year is $23,850, and extends to $95,400 annually.
- You can’t qualify for Medicare, Medicaid, or other coverage, including employer-sponsored coverage which covers a significant portion of your external costs.
When you enroll for coverage through the Marketplace, you may be notified that you possibly qualify for the premium tax credit. If this occurs, there are two options you can choose from. You can either choose to have the estimated credit amount applied directly to the insurance company, which will instantly lower your monthly costs throughout 2015, or you can wait until you file your 2015 tax return and receive the credit in your 2016 return.
If you chose the latter option, your tax obligation can change. It may increase your refund or decrease the amount you owe.
If you apply the credit to your monthly premiums, any changes in your income or family status can alter the credit amount you qualify for. If the credit you receive doesn’t match what’s listed on the 2016 tax return, you will be liable for any excess monies paid. Conversely, you can also get a refund if you overpaid. Because of this, it’s crucial that you inform the Marketplace about all income and family size changes throughout the 2015 tax year, so you receive the appropriate credit.
