The federal Affordable Care Act mandates that Americans have health insurance coverage that meets certain minimum standards. Demand in Florida has been high, particularly in South Florida. As the IRS explains, a premium tax credit helps shoulder what is, for many individuals, families and small businesses, the burdensome cost of health insurance. For example, if an individual purchases health insurance through the marketplace, he or she may qualify for subsidies in the form of tax credits that lessen the cost the person has to pay. Here’s what you need to know about these health insurance tax credits.
1. You Could Be Eligible If…
You have to satisfy a few requirements in order to qualify for a premium tax credit. The requirements include:
- Not qualifying for other programs such as CHIP or Medicaid.
- Meeting certain income criteria, typically up to 100 percent to 400 percent of the federal poverty line.
- Not being someone else’s dependent on his or her tax return.
- Not filing a Married Filed Separately return (narrow exceptions apply).
- Not qualifying for an employer plan that provides the required coverage under the Affordable Care Act.
- Enrolling in coverage through the Health Insurance Marketplace.
As you go through the process at the marketplace website, there will be frequent checks to ensure you qualify.
2. You Most Likely Need to File a Federal Tax Return
You may not have filed tax returns in the past, and if this is the case, you need to start now in order to claim health insurance tax credits. Form 8962 is required even if your insurer directly receives monthly advance credit payments from marketplace officials. If you do not file a return, you are no longer eligible for future health insurance tax credits.
3. You Will Deal with Some Paperwork
Expect to receive a few documents and forms. For example, Publication 974 explains the tax credit in detail, while Form 1095-A is a statement provided by the Health Insurance Marketplace. Form 1040 is what you use to file federal tax returns, and Form 8962 is what you need to file for the health insurance tax credit.
4. Filing Is Fairly Easy
With electronic filing, it is relatively simple to file your tax return and claim your credit. IRS Free File is one option, as is a volunteer or professional help.
Are You a Small Business?
If you own or run a small business, you should check out the IRS page dealing with health insurance tax credits and small businesses. If you have no more than 25 full-time employees (or their equivalents), you may qualify for the credit. Other criteria include paying an average wage of less than $50,000.
The Affordable Care Act established the Small Business Health Options Program, also called the SHOP Marketplace, to help small businesses comply. Your small business is generally required to pay some of the cost of employee premiums in SHOP.
Health insurance tax credits can seem overwhelming. Professionals such as CPAs can help you navigate these complexities.