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What Does Excess Advance Premium Tax Credit Repayment Mean

If your household income decreases or you earn a household member, you may be eligible for more upfront payments than are currently paid for you. This could reduce what you pay in monthly premiums. Also, declaring your low household income or a new family member could show that you qualify for Medicaid or CHIP coverage, which is less expensive than your Marketplace plan. For 2021 and 2022, ARPA will provide skilled households with larger PTCs. The Act extends eligibility to taxpayers whose household income is above 400% of the federal poverty line by lowering the premium contribution limit to 8.5% of household income. All household income levels will see an increase in premium credits for 2021 and 2022. It removes the requirement for people to repay a portion of all their loans due to changes in income levels for 2020. Finally, it would increase the amount of loans available to people who received unemployment benefits at some point in 2021. If your total TPC on Form 8962, line 24, is less than your TPC on line 25, you are not eligible for the net TPC. Only for the 2020 tax year, you do not have to repay the excess amount of the APTC. Do not submit Form 8962 upon return. The amount you would have entered on Form 8962, line 29, is the amount of your EXCESS APTC that you do not have to repay now due to the American Rescue Plan Act.

Do not complete Part III of Form 8962 and do not follow the instructions in that Part. Leave line 2 of Schedule 2 (Form 1040) blank. If you have already filed a return and have an excess premium tax credit, you do not need to file an amended tax return or take any other action. The IRS will refund any excess APTC you paid on your 2020 tax return. Premium credits are calculated based on the monthly cost of the second lowest money plan and expected annual income, limiting monthly premium contributions to 2.07 to 9.83% of household income. Increasingly large loans are being made to low-income families. If you notify the Marketplace of any change in circumstances as soon as they occur, the Marketplace may update the information used to determine the expected amount of the premium tax credit and adjust your prepayment amount. This adjustment reduces the likelihood of a significant difference between your initial payments and your actual premium tax credit.

Changes in circumstances that may affect the amount of your actual premium tax credit include: Taxpayers who received incremental excess premium tax credit (excess CTA) payments for the 2020 taxation year are not required to file Form 8962, Premium Tax Credit, or refund them on their 2020 individual income tax return, pointed out the IRS in a press release (IR-2021-84). The American Rescue Plan Act (ARPA), P.L. 117-2, suspended the claim for reimbursement for the 2020 tax year. If APTC is done on your behalf or on behalf of a family member and you do not file a tax return, you are not eligible for APTC to pay for your Marketplace health insurance in the coming years. This means that you are responsible for the total cost of your monthly premiums. If your household income increases or your household size is smaller than you reported to the market – for example, because a son or daughter you thought was your loved one won`t be your loved one for the year of coverage – your initial payments may be higher than the premium tax credit you`re allowed to receive for the year. If you report the change, the Marketplace may reduce the amount of your loan prepayments. If you do not report the change and your initial payments are greater than the premium tax credit you are entitled to receive, you will need to reduce your refund or increase the amount of tax you owe by all or part of the difference when you file your federal tax return next year.

The actual premium tax credit for the year will differ from the amount of the advance estimated by the market if your family size or household income, as estimated at the time of registration, differs from the family size or household income you provide upon your return. The more your family size or household income deviates from the Market estimates used to calculate your prepayments, the greater the difference between your prepayments and your actual loan. .