The premium tax credit provides money to help individuals and families in moderate income brackets to afford their health insurance premiums. Your eligibility to receive the credit, and how much of a credit you are eligible for, is determined by your income when you file your taxes.
This tax credit only applies to insurance purchased through the marketplace.
If you opt to estimate your income and receive advance payments, any money that you are entitled to will be paid directly to your insurance company. Essentially, it works like a discount on your insurance premiums. If your income ends up being significantly higher than you estimated for the year, you may be asked to pay back some of the credit you received. This will come out of your tax return.
If you choose instead to receive your tax credit as a refund at tax time, it will either reduce the tax you owe at the end of the year, or boost your tax refund. You’ll pay for your insurance premiums on your own and be “paid back” for the credit, through your tax return.