As people sign up for marketplace coverage, premium tax credits are determined based on the annual income they expect to earn that year. Later, when they file their federal tax return, people must reconcile the premium tax credit they received with the actual annual income they report on their return. Normally, people who under-estimate annual income – and receive too much advanced premium tax credit (or APTC) during the year – are required to repay some or all of the excess when they file their federal tax return for that year. When you file your 2021 return, you will need to include Form 8962, which will walk you through the calculations to determine whether you received any excess premium tax credit and how much you are required to repay. See these FAQs for more information.
Recognizing the high degree of economic dislocation and uncertainty that took place during the pandemic, Congress waived excess APTC repayment for the 2020 tax year only. However, the requirement to repay excess APTC resumed for the 2021 tax year and beyond.
When you sign up for marketplace coverage and premium tax credits this year, try to estimate your annual income as accurately as possible. And, if your income changes during the year, update your marketplace account as soon as possible to avoid receiving excess premium tax credit.