The Affordable Care Act mandates that US residents should have health insurance and to help citizens compensate the costs of their health insurance plans, the Act also offers the Premium Tax Credit break for everyone who qualifies for the same. If you are someone who has purchased any healthcare insurance policy from Marketplaces (Health Care Exchanges), then you must have received the Form 1095-A.
However, all those of you who are not familiar with Form 1095-A, this informative guide is just what you need! So, keep reading!
- What is Form 1095-A?
The Form 1095-A is a Health Insurance Marketplace Statement that is mailed to you when you buy a health insurance plan through the Marketplace. It contains the details about your health insurance policy, your premiums, advance payment of premium tax credit (if any), and the names of your family members who covered by the policy.
- What’s the need for Form 1095-A?
Although you do not need the Form 1095-A to file your taxes, it helps you file your taxes accurately. While filing your taxes, you must report to the IRS about your health insurance policy, and that is where the Form 1095-A comes in. Furthermore, Form 1095-A also allows you to claim the premium tax credit and reconcile any credit on the returns pertaining to the advance credit payments. Thus, it can be used to complete IRS Form 8962 (Premium Tax Credit).
- How can one qualify for Premium Tax Credit (PTC)?
To qualify for the Premium Tax Credit one’s income has to come within a certain income range, that is, anywhere between 100%-400% of the federal poverty level. As of 2017, the federal poverty level stands at $12,060 for a single individual. When you multiply $12,060 with 4, you get the 400% of the federal poverty level. So, the numbers for 2017 would be as follows:
- Single individual: $12,060 – $48,240
- Family of two: $16,240 – $64,960
- Family of three: $20,420 – $81,680
- Family of four: $24,600 – $98,400
- Family of five: $28,780 – $115,120
- Family of six: $32,960 – $131,320
- Family of seven: $37,140 – $148,560
- Family of eight: $41,320 – $165,280
- How to calculate your household income for Premium Tax Credit?
Determining your household income is quite simple. First, you need to start with your household’s adjusted gross income (AGI) from your most recent tax return. Then you need to add the following income (if any) to your AGI –
- Tax-exempt foreign income
- Tax-exempt Social Security benefits
- Tax-exempt interest income
However, keep in mind that you cannot include Supplemental Security Income (SSI) here. Once you’ve added these incomes to your AGI, you get your household income and you can further adjust it by including any expected changes such as salary raises, changes in income from sources like investments, alimony, etc., and so on.
- What are the ways to use the Premium Tax Credit?
Every taxpayer who is eligible for PTC can choose to use the tax credit in either of the two ways:
- Use the tax credit to reduce the tax liability when filing for tax returns.
- Use the tax credit to reduce the insurance premiums in advance.
While the first option is very simple since you only have to calculate the credit amount and subtract it from your tax liability, the second option is more complex. This is because the government will give you credit in advance by directly sending the credit to your insurance provider. So, while calculating the reduced amount of your insurance premiums, you’ll not only have to calculate the credit amount but you will also have to compare it the sum you paid to your insurance provider.
So, there, you have it – all the information you need to know about Form 1095-A. We hope this helps!
For any further queries related to Form 1095-A or any such tax-related issues, reach out to MyTaxFiler at email@example.com or 1-888-482-0279.