Claiming the Premium Tax Credit Under the ACA using Form 8962
One of the beneficial features of the Affordable Care Act (ACA) is that individuals who purchase health coverage through the Healthcare Marketplace may be eligible for a tax credit on their federal tax return. Form 8962 is used to claim the credit, using information supplied on Form 1095A, Verification of Health Coverage. It is important to note that the Premium Tax Credit is only available if you purchased a Marketplace health plan, and non-Marketplace plans will not qualify.
Who Needs to Fill Out Form 8962?
You only need to fill out the form if you bought coverage through the Healthcare Marketplace and if you are eligible for a tax credit. In some cases, the tax credit was applied to reduce premium payments (cost assistance), and may not affect your final tax amount owed, unless there was an excess payment.
The Form 8962 can only be used with federal tax return forms 1040 or 1040-A, and cannot be used with 1040-EZ. The instructions and calculations for Form 8962 are very detailed and may require tax preparation assistance for some filers.
How the Form is Used
The information that you need to fill out the form is on Form 1095-A, which gives the premium amounts and coverage details of your qualified health plan from the Marketplace.
The form has calculations that must be made based on the following items:
- MAGI: Modified Adjusted Gross Income, which takes into account any excluded income or benefits from the standard AGI computation.
- Number of family members and total household income.
- Comparison of household income as a percentage of the federal poverty level.
- If household income (based on MAGI) is between 100% and 400% of the federal poverty level, then you will qualify for the Premium Tax Credit.
All of these elements will be used to determine if you qualify for the premium tax credit. If you received cost assistance, this is known as getting the tax credit in advance, and there is a place to note that on the form. If the advance payment was in excess, or you did not qualify for some reason, then the amount will be added to your tax liability. Excess advance payments are reported on line 46 of Form 1040, and the Net Premium Tax Credit is reported on line 69.