If you wish to effectively navigate the world of tax filing, then it is essential for you to have a proper understanding of the different forms that you might be asked to fill out and the requirements that the IRS wishes you to complete based on your income or situation. One of the most important forms that you need to know about is the Form 8962, which is also known as the Premium Tax Credit Form.
People who have Premium Tax Credit, aka PTCs, have the option to receive the same on their federal income tax return. On the other hand, they can also opt for advance payments to ensure that they can cover their monthly insurance in advance. This form can be used by people to claim tax credits on their income tax return and accommodate their monthly payments. Since you do not have a complete overview of the form, this guide will provide you with all the basic information that you need about the 8962 form.
What is the meaning of Premium Tax credits?
PTCs, or health insurance premium subsidies, are designed to assist lower-income people in the United States to a considerable extent, so they can afford to purchase health coverage through the Health Insurance Marketplaces (also called exchanges), which the Affordable Care Act (ACA) has established.
The ACA allows you to receive PTCs if your annual household income is between 100% and 400% of the federal poverty line (FPL) and you do not have access to affordable coverage from an employer or government program such as Medicare or Medicaid. Nevertheless, the Inflation Reduction Act has continued the American Rescue Plan’s temporarily increased PTCs accessibility through 2025. Any single person or a family whose Marketplace plan costs more than 8.5% of their income gets a tax credit.
Who is required to fill out the form 8962?
To take advantage of PTCs, you have to fill out Form 8962. This tax form can also be used to reconcile advance premium tax credit (APTC) payments, if applicable.
You must include Form 8962 with your tax return if any of the following applies to you:
- You are claiming the PTC
- One of the persons in your tax family got APTC
- You got APTC for someone you indicated would be in your tax family, but they weren’t.
If you received Form 1095-A because of your enrollment in Health Insurance Marketplace coverage, you will apply it to complete Form 8962.
Why is it required for you to fill out the form 8962?
Applying for a PTC during the open enrollment period means that the Marketplace will determine the amount of advanced credit based on your projected income for the next year. The following year, when you file your return, your income will be known. If your projection was lower than your real income, part of the credit could be asked to be returned.
In case it was higher than, you’ll be receiving an additional tax credit from the IRS. Use Form 8962 to align your projected and actual income. Even if you did a perfect estimation, you are still required to submit Form 8962 with your federal tax return.
