Key Takeaways
- If you bought health insurance through a Health Care Exchange or Marketplace, you should get Form 1095-A, the Health Insurance Marketplace Statement.
- Form 1095-A reports your amount of coverage, any advance payment of tax credits you used to pay for health insurance, and the names of people covered by the policy.
- You can use the information on Form 1095-A to complete Form 8962, which you can file with your tax return to claim the premium tax credit.
- You can use the information on Form 1095-A to adjust any tax credit payments and calculate any of the tax credit that you are required to pay back if you received too much of the advance premium tax credit during the year.
Premium Tax Credit
The Affordable Care Act, also known as Obamacare, requires most U.S. residents to have health insurance, but it also offers a tax break, the premium tax credit, to help offset the costs of health coverage for those who qualify. If you bought coverage through one of the health insurance marketplaces, you should receive Form 1095-A, that provides information needed to claim the tax credit.
The role of the Marketplace
The "Marketplace" is the government's term for the online insurance markets or "exchanges" set up under the law commonly known as Obamacare. Only people who buy coverage through the Marketplace are eligible for the premium tax credit.
If you bought your plan there, you should get a Form 1095-A, also called the "Health Insurance Marketplace Statement." The IRS also gets a copy of the form. The form provides information about your insurance policy, your premiums (the cost you pay for insurance), any advance payment of premium tax credit and the people in your household covered by the policy.
Insurance companies in health care exchanges provide you with the 1095-A form. This form includes:
- your name
- amount of coverage you have
- any advance payment of tax credits you used to pay for your health insurance
You use this information to complete your income tax filing, adjust any tax credit payments, claim any premium tax credits that may be due and calculate any of the tax credit that you are required to pay back if you received too much advance premium tax credit during the year.
Who qualifies for the premium tax credit
Your income has to be within a certain range to qualify for the premium tax credit. That income range is between 100% - 400% of the federal poverty level. As of 2022, the federal poverty level for most of the United States was $13,590 for a single person. The 2022 amounts are the latest available during open enrollment for 2023 and are therefore used with your 2023 tax return.
Multiply the total by 4 to get 400% of the level. Therefore, the eligible ranges for use with your 2023 taxes are:
- for one person: $14,580 - $58,320
- for a family of two: $19,720 - $78,880
- for a family of three: $24,860 - $99,440
- for a family of four: $30,000 - $120,000
- for a family of five: $35,140 - $140560
- for a family of six: $40,280 - $161,120
- for a family of seven: $45,420 - $181,680
- for a family of eight: $50,560 - $202,240
For households with more than 8 people, add $5,140 for each additional person per year.
Poverty levels are higher in Alaska and Hawaii, where the cost of living is higher.
TurboTax Tip:
If you have any of the premium tax credit left over, you could use it to reduce your taxes or receive a refund.
Two ways to take the tax credit
Taxpayers who are eligible for the premium tax credit have a choice in how they receive it. You generally make the choice at the time you buy coverage in the Marketplace. The options are:
- Use the credit to reduce your taxes when you file your return at tax time.
- Use the credit to reduce your insurance premiums in advance when you pay the insurance premiums.
The first option is pretty straightforward: At tax-filing time, you figure the amount of your credit and then subtract that amount from your tax liability.
The second option is more complicated, because the government gives you the credit in advance—by sending money to your insurer to reduce your premiums. In this case, you figure the amount of your credit and compare it to the amount paid to your insurer to reduce your premiums.
Using the information on the form
Whichever option you choose for taking the premium tax credit, you claim it by filing Form 8962 with your tax return. You'll need your Form 1095-A to fill out this form.
- If you used your credit to reduce your premiums, Form 8962 will tell you if you have any of the credit left over, in which case you could use it to reduce your taxes or receive a refund.
- On the other hand, if the amount paid to your insurer actually exceeded the credit amount that you are eligible for, you would have to pay back the excess amount with your tax return (The American Rescue Plan Act of 2021 suspended this requirement for tax year 2020).
This can happen if your income increases during the year and you didn't update your information with the Marketplace.
If you use TurboTax to prepare your tax return, the software will ask you the questions necessary to complete Form 8962 and attach it to your tax return for you.
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