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Clearing up Premium Tax Credit Confusion
So what’s all the news “hooplah” about the Premium Tax Credit? Applies if:
Have Medical Insurance from Health Insurance MarketPlace (Healthcare.Gov) [NOT MEDICARE OR MEDICAID] and
Household Income is less than 400% of poverty guidelines AND
Purchase a Silver or higher plan with a reduced Premium or Premium Discount.
The Premium Discount is the PREMIUM TAX CREDIT. Credit makes insurance affordable. It was increased during COVID. US Congress could not agree on whether to leave the discount the same or return the discount to Pre-COVID levels. So they SHUT DOWN THE COUNTRY.
The Premium Tax Credit is a potential tax “landmine”. The Taxpayer estimates their next year income during the Enrollment Period. This Estimate is used to calculate Insurance Premiums and Premium Tax Credit Discount. At Tax Return time, Taxpayers’ Medical Insurance Premium and Discounts are recalculated based on Tax Return reported HOUSEHOLD INCOME.
If Taxpayer received too much Premium Discount, the repayment difference is reconciled on the Tax Return. Prior Rules limited the repayment pain. Now there’s no repayment limit. Taxpayers must repay all of non qualified benefit regardless of income. OUCH!
2026 Healthcare.Gov Medical Insurance Premiums are projected to increase. Premium Tax Credit Rate is projected to decrease, resulting in “sticker shock” to many.
ADVICE: If have Marketplace insurance, contact them immediately to update significant changes, helps minimize “tax landmine” issues. Look at Medical Sharing, Short Term, Indemnity, Catastrophic or Employer coverage as possible alternatives.