Even though most tax provisions of the Affordable Care Act do not begin to affect federal tax returns until next filing season, the provisions will have an impact on the decisions taxpayers make if they need to obtain their health insurance through an Exchange and they receive the advanced premium tax credit (subsidy) to help them pay for their premiums. Below you will find more IRS resources available to taxpayers that help explain the tax provisions and a reminder about the Premium Tax Credit.
The IRS has added a Health Care Tax Tips page to their website to help individuals understand how the Affordable Care Act may affect their taxes beginning with their 2014 federal return.
At the present time this site provides links to information on:
- Premium Tax Credit
- Why it is important for individuals who obtain health insurance through an Exchange and receive a subsidy to help pay for their insurance premiums to inform the Exchange of changes in their income or family size during 2014
- Overview of the penalty for not obtaining health insurance and who is exempt from the penalty provision
- Where to obtain more information on health insurance exchanges, other tax law provisions of the Affordable Care Act, and individuals’ health care choices
The IRS will be adding to this site throughout 2014 so be sure to check it periodically to see what new information the IRS has posted.
Even though the calculation of the premium tax credit will not take place until next year, it is essential to become familiar with this credit. Doing so will enable you to better explain to your clients who received a subsidy how it will affect them when they file their 2014 federal return next filing season.
Below is a brief overview on the premium tax credit:
Every taxpayer who received an advanced premium tax credit to help pay for their health insurance will have to complete the 2014 Premium Tax Credit form when filing their 2014 federal return. The calculated amount of the 2014 premium tax credit will then be compared to the subsidy amount they received which will result in one of the following:
- The taxpayer will receive a refundable credit if the premium tax credit is more than the subsidy amount.
- The taxpayer will have to pay an additional tax if the subsidy amount is higher than the premium tax credit. The amount of additional tax will be limited based on where the taxpayer falls on the federal poverty line. It will range from a minimum of $300 ($600 for married filing joint) to a maximum of $1,125 ($2,500 for married filing joint).
It is important to understand that a taxpayer who receives a subsidy to help pay for their health insurance premiums is required to file a 2014 federal return and complete the premium tax credit form. This is true even if they otherwise would not be required to file a federal return. If they do not complete the premium tax credit form, they will not be able to receive a subsidy in future years.
Also, here are other Premium Tax Credit resources available on the IRS website:
