Why do I have to pay back my health insurance tax credit?
Asked by: Doug Ondricka IV | Last update: April 30, 2025Score: 4.9/5 (45 votes)
How can I avoid paying back my premium tax credit?
The only way to reduce your APTC (Advanced Premium Tax Credit) repayment is to reduce your AGI, and the only way to do that after the tax year is over (ie, now), for most folks is to make a deductible contribution to a traditional IRA or make a contribution to an HSA for tax year 2023.
Why do I owe money to premium tax credit?
Most people only have to pay back a portion of the extra because of limits on payback... If you over-estimated your income in advance and got less premium tax credits than you deserved, then you get the extra amount that you are owed.
Why am I getting a tax credit for health insurance?
In general, individuals and families may be eligible for the Premium Tax Credit if their household income for the year is at least 100 percent but no more than 400 percent of the federal poverty line for their family size.
Do you have to pay the tax credit back?
If you qualify for a “refundable” tax credit, you'll receive the entire amount of the credit. If the credit exceeds the tax you owe, you'll receive the remaining amount as a tax refund. Even if you owe no taxes, you can apply for and receive a refundable tax credit.
Tax relief on HEALTH INSURANCE | Benefit in Kind
Why do I owe taxes for health insurance?
Owe taxes if you used more of the premium tax credit than you qualified for in 2024. You'll have to report the excess amount on your 2024 tax return by filing Form 8962, Premium Tax Credit (PDF, 115 KB). Find instructions for Form 8962 (PDF, 348 KB).
Can a tax credit be refunded?
Some tax credits are refundable. If a taxpayer's tax bill is less than the amount of a refundable credit, they can get the difference back in their refund. Some taxpayers who aren't required to file may still want to do so to claim refundable tax credits. Not all tax credits are refundable, however.
How do healthcare tax credits affect my refund?
If you choose not to get advance credit payments, the full amount of the premium tax credit you are allowed will lower the amount of tax you owe for the year, or increase your refund to the extent your premium tax credit is more than the amount of tax you owe.
What is the income limit for tax credit for health insurance?
To be eligible for the premium tax credit, your household income must be at least 100 percent and, for years other than 2021 and 2022, no more than 400 percent of the federal poverty line for your family size, although there are two exceptions for individuals with household income below 100 percent of the applicable ...
Do you have to pay back healthcare subsidies?
The federal government offers two types of subsidies to make health insurance more affordable for individuals and families who qualify. It is important to know that a subsidy is not a loan; you will not have to pay it back. A subsidy is just assistance to pay for your health care.
What disqualifies you from the premium tax credit for health insurance?
The premium tax credit is only available to people without another offer of affordable and adequate coverage; in most cases, this will mean that people with an offer of employer-sponsored coverage will not be eligible for the premium tax credit.
Can I cancel my employer health insurance and get Obamacare?
If you decline individual health insurance through your employer, you can enroll in an Obamacare plan through the Marketplace. Although you most likely will not qualify for any subsidies or other financial assistance.
What happens if I underestimate my income for Obamacare in 2024?
For the 2024 tax year, if you underestimated your income and received a larger tax credit than you were eligible for, you must repay the difference between the amount of premium tax credit you received and the amount you were eligible for.
What happens if I don't report my 1095-A?
You can use Form 1095-A to reconcile any advance premium tax credits you received during the year with the amount of credits you were eligible to receive. If you fail to file a tax return reconciling those payments, you will not be eligible for premium tax subsidies in the next year.
Why is my premium tax credit so high?
The amount of the tax credit you may receive depends on your income and the cost of Marketplace health plans in your area. The Marketplace will determine the expected contribution you are required to pay toward the premium for a mid-range (Silver) benchmark plan.
Should I use a tax credit for health insurance?
If you qualify for a tax credit, using it can be an excellent way to lower your monthly healthcare costs.
How do I avoid premium tax credit repayment?
Avoiding or Reducing Premium Tax Credit Repayments
The key to reducing the amount of premium tax credits you have to repay is keeping your household income below 400% of the federal poverty level. As long as your income is below this level, your repayments are capped.
Can you get a refund for health insurance premiums?
Federal/State Law
Federal law allows a refundable premium tax credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace.
Will a 1095 lower my tax return?
Yes. In some cases, the information on the corrected Form 1095-A may be in your favor – it may decrease the amount of taxes you owe or increase your refund.
How does the IRS know if you have health insurance?
How does the IRS know if you have health insurance? The IRS will know you have health insurance if you use a 1095 to file your taxes. If you don't have health insurance, you will not be penalized by the IRS.
Do you have to pay back tax credits?
If at the end of the year you've taken more premium tax credit in advance than you're due based on your final income, you'll have to pay back the excess when you file your federal tax return. If you've taken less than you qualify for, you'll get the difference back.
What is the difference between a tax credit and a tax refund?
A tax credit is a dollar amount that you can subtract from your income tax to reduce your overall tax liability. So, while a tax refund simply represents the difference between the taxes you paid versus the taxes you actually owe, a tax credit is a benefit that directly reduces your tax burden.
What is a downside of receiving a tax refund?
One major downside is the concept of opportunity cost. When you receive a tax refund, it typically means that you have been paying more in taxes than necessary throughout the year. This money could have been invested or used for daily expenses, thereby generating potential income or meeting immediate needs.