The advanced premium tax credit or shortly known as the APTC is a tax credit that was introduced with the Affordable Care Act. This isn’t a tax credit that aims to lower tax liability or increase tax refund. Instead, it’s there to cover a portion of your monthly premiums for health coverage.
Generally, most people who meet the following are eligible for the advanced premium tax credit.
- You are not eligible for CHIP (Children’s Health Insurance Program).
- You are not eligible for Medicaid.
- You are not eligible for employer-sponsored health coverage.
- Your Modified Adjusted Gross Income (MAGI) is between 100% and 400% of the federal poverty level.
Your MAGI basically your adjusted gross income but certain adjustments added back.
To calculate your MAGI, figure out adjusted gross income and add back the following deductions; IRA contributions deduction, taxable Social Security payments, partnership losses, passive income or loss, rental losses, excluded foreign income, interest from EE savings bonds used to pay for higher education expenses, and exclusion for adoption expenses.
How to get the Advanced Premium Tax Credit?
One thing to know about the advanced premium tax credit is that only those who get coverage through the Marketplace either run by the healthcare,gov or their state are eligible. Learn more about 2024 health coverage through Marketplace.
There are two ways you can get the APTC. You can either apply for the credit when you get health coverage through the Health Insurance Marketplace or get it when you file a federal income tax return for that tax year. This credit isn’t automatic so you must claim it yourself.
There might be also cases where you will reconcile APTC. If the credit you’ve taken is more than what you would normally get based on your final income, you must pay the excess amount when you file your return. On the contrary side, if the APTC you claimed is less than what you deserve, you will get the difference in your tax refund. So it’s a refundable tax credit.