Premium Tax Credit (PTC)
The Premium Tax Credit is a refundable credit that helps eligible individuals and families afford health insurance purchased through the Health Insurance Marketplace, based on household income between 100-400% of the Federal Poverty Level.
Exam Tip
PTC is refundable. Income 100-400% FPL. Form 8962 reconciles advance payments. Must file return even if income below threshold. MFS generally disqualified.
What is the Premium Tax Credit?
The PTC helps low- and moderate-income taxpayers pay for Marketplace health insurance. It can be taken in advance (APTC) or claimed at filing.
Eligibility Requirements
| Requirement | Detail |
|---|---|
| Income | 100-400% of Federal Poverty Level (FPL) |
| Marketplace plan | Must enroll through Healthcare.gov or state exchange |
| Not eligible for other coverage | No affordable employer plan or government coverage |
| Filing status | Cannot file as Married Filing Separately (exceptions apply) |
Advance vs. Filing
| Method | How It Works |
|---|---|
| Advance PTC (APTC) | Paid directly to insurer monthly |
| Claim at filing | Full credit taken on tax return |
| Reconciliation | Form 8962 compares APTC to actual PTC |
Reconciliation Outcomes
| Situation | Result |
|---|---|
| APTC > Actual PTC | Repay excess (capped for lower incomes) |
| APTC < Actual PTC | Receive additional refund |
| Must file return | Required even if not otherwise required |
Exam Alert
PTC is REFUNDABLE. Must file a return to claim or reconcile. Form 8962 is required. If APTC was received but no return filed, taxpayer may be ineligible for future advance payments.
Study This Term In
Related Terms
Refundable Tax Credit
A refundable tax credit can reduce tax liability below zero, resulting in a refund to the taxpayer. The excess credit amount is paid as a refund even if no tax was owed.
Filing Status
Filing status is a classification that determines a taxpayer's tax rate schedule, standard deduction amount, and eligibility for certain credits and deductions, with five options: Single, MFJ, MFS, HOH, and QSS.
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