1.20- What is Premium Tax Credit (Affordable Care Act)?

The premium tax credit – also known as PTC – is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the Health Insurance Marketplace. To get this credit, you must meet certain requirements and file a tax return with Form 8962, Premium Tax Credit (PTC).

2021 and 2022 PTC Eligibility. For tax years 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA) temporarily expanded eligibility for the premium tax credit by eliminating the rule that a taxpayer with household income above 400% of the federal poverty line cannot qualify for a premium tax credit.

2021 Unemployment Compensation. If you, or your spouse (if filing a joint return), received, or were approved to receive, unemployment compensation for any week beginning during 2021, the amount of your household income is considered to be no greater than 133% of the federal poverty line for your family size and you are considered to have met the household income requirements for eligibility for a premium tax credit. Keep any supporting documentation related to receiving or the approval to receive unemployment compensation with your tax return records.

Who Qualifies?

You are eligible for the premium tax credit if you meet all of the following requirements. You:

• Have household income that falls within a certain range.

  • If you, or your spouse (if filing a joint return), received, or is approved to receive, unemployment compensation for any week beginning during 2021, your household income is considered to fall within this range.

• Do not file a tax return using the filing status of Married Filing Separately.

  • There is an exception to this rule that allows certain victims of domestic abuse and spousal abandonment to claim the credit using Married Filing Separately; for more information, see the Premium Tax Credit questions and answers.

• Cannot be claimed as a dependent by another person.

• Meet these additional requirements: In the same month, you or a family member:

  • Have health insurance coverage through a Health Insurance Marketplace for which the share of the premium not covered by advance credit payments is paid by the due date of your return.

  • Are not able to get affordable coverage through an eligible employer-sponsored plan that provides minimum value.

  • Are not eligible for coverage through a government program, like Medicaid, Medicare, CHIP or TRICARE.

For more information about these eligibility requirements see Eligibility for the Premium Tax Credit.

When you enroll, the Marketplace will determine if you are eligible for advance payments of the premium tax credit, also called advance credit payments or APTC. Advance credit payments are amounts paid to your insurance company on your behalf to lower the out-of-pocket cost for your health insurance premiums.

For more information about the premium tax credit, see our Questions and Answers and other guidancePDF.

Change in Circumstances

If you benefit from advance payments of the premium tax credit, it is important to report life changes to the Marketplace as they happen throughout the year.

Certain changes to your household, income or family size may affect the amount of your premium tax credit. These changes can alter your tax refund, or cause you to owe tax. Reporting these changes promptly will help you get the proper type and amount of financial assistance. For more information, see the Changes in Circumstances section of our Claiming the Credit and Reconciling Advance Credit Payments page.

Claiming and Reconciling the Credit

For tax years other than 2020, if you get the benefit of advance credit payments in any amount – or if you plan to claim the premium tax credit – you must file a federal income tax return and attach Form 8962, Premium Tax Credit (PTC), to your return. You claim the premium tax credit and reconcile the credit with the amount of your advance credit payments for the year on Form 8962.

You must file a return to reconcile the credit with the amount of your advance credit payments even if you’re usually not required to file. Filing your return without reconciling your advance credit payments will delay your refund and may affect your eligibility for future advance credit payments. For more information on filing a return to claim and reconcile the credit see Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments.

Filing electronically is the easiest way to file a complete and accurate tax return. Electronic filing options include free volunteer assistance, IRS Free File, commercial software and professional assistance.

Requirement to repay excess advance payments of the premium tax credit is suspended and certain unemployment compensation is excludible

The American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021, suspended the requirement to repay excess advance payments of the premium tax credit (excess APTC, which is the amount by which your advance credit payments for the year exceed your premium tax credit for the year) for tax year 2020.

If you already filed a 2020 return and reported excess APTC or made an excess APTC repayment, you don’t need to file an amended return or take any other action. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess APTC repayment amount to zero.

If you have not filed your 2020 tax return, here’s what to do:

• If you have excess APTC for 2020, you are not required to report it on your 2020 tax return or file Form 8962, Premium Tax Credit (PTC).

• If you’re claiming a net premium tax credit for 2020, you must file Form 8962, Premium Tax Credit (PTC).

For details see the Tax Year 2020 Premium Tax Credit:

• Frequently Asked Questions

• Fact Sheet

• News Release

For tax years other than 2020, if you get the benefit of advance credit payments in any amount – or if you plan to claim the premium tax credit – you must file a federal income tax return and attach Form 8962, Premium Tax Credit (PTC), to your return. You claim the premium tax credit and reconcile the credit with the amount of your advance credit payments for the year on Form 8962.

For tax years other than 2020, you must file a return to reconcile the credit with the amount of your advance credit payments even if you’re usually not required to file. Filing your return without reconciling your advance credit payments will delay your refund and may affect your eligibility for future advance credit payments. For more information on filing a return to claim and reconcile the credit see Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments.

Filing electronically is the easiest way to file a complete and accurate tax return. Electronic filing options include free volunteer assistance, IRS Free File, commercial software and professional assistance.

Excludible Unemployment Compensation for 2020

Under ARPA, eligible taxpayers are allowed to exclude up to $10,200 of unemployment compensation received in 2020 on their 2020 Form 1040, 1040-SR, or 1040-NR. Beginning in July 2021, the IRS reviewed tax returns filed prior to the enactment of ARPA to identify tax returns on which both excludible unemployment compensation and excess APTC repayments were reported by the taxpayer. Taxpayers received letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment. For taxpayers who reported both excludible unemployment income and APTC, the adjustment should have covered both items even though the IRS’s communication to the taxpayer may have mentioned only unemployment compensation.

However, if, because of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return for tax year 2020. See 2020 Unemployment Compensation Exclusion FAQs — Topic D: Amended Return (Form 1040-X) for more information.

Key Documents and Forms

Form 1095-A, Health Insurance Marketplace Statement

Your Marketplace will provide Form 1095-A if you or one of your dependents had coverage through a Marketplace. For more information, visit our Health Insurance Marketplace Statement page.

If you also receive Form 1095-B or Form 1095-C, which are unrelated to the Marketplace, see our questions and answers for information about how these forms affect your tax return.

Form 8962, Premium Tax Credit

Use the information on Form 1095-A to claim the credit or reconcile advance credit payments on Form 8962, Premium Tax Credit.

Form 1040

File Form 8962 with your Form 1040, Form 1040-SR or Form 1040-NR.

Publication 974, Premium Tax Credit

View Publication 974 for more details on the premium tax credit.