Help Paying Marketplace Premiums: Challenges Estimating Income and Tax Consequences

I’m pretty sure my income for the coming year will be less than 400% of the FPL so I’d like to apply for premium subsidies. But what if I’m wrong and my income ends up being more than 400% FPL?

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The American Rescue Plan made changes to marketplace subsidy eligibility and repayment for 2020, 2021, and 2022.

For the 2020 tax year, people who received excess premium tax credit are not required to repay the excess.  When you file your 2020 tax return, use form 8962 to determine whether you received the correct premium tax credit amount for 2020.  If you received too much, you are not required to repay the excess for that year.  The IRS advises that you not report an excess premium tax credit amount on the 2020 Form 1040, and to not file Form 8962 with your return. 

For the 2021 and 2022 tax years, The American Rescue Plan expanded eligibility for premium tax credits to people at all income levels.  If your income for 2021 turns out to be greater than the amount you estimated when you sign up, you may have to repay some of the excess credit, but not the entire amount.  For example, say you estimated at sign up that your 2021 income would be 350% of the poverty level, and you receive advanced premium tax credit of $4,000 based on that income.  But, when you file your 2021 return, your actual income turns out to be 410% FPL and you would only be eligible for a $3000 tax credit based on that income.  In this case you might have to repay $1000 in excess credit when you file your 2021 return next year.  

If you experience a change in income during the year, you can log into your marketplace account, update your information, and reduce the monthly premium tax credit for the remainder of the year in order to minimize any excess credit that might need to be repaid.

While we have made every effort to provide accurate information in these FAQs, people should contact the health insurance Marketplace or Medicaid agency in their state for guidance on their specific circumstances.

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Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in San Francisco, California.