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Eligibility for the Premium Tax Credit

posted Dec 6, 2015, 9:26 PM by Zaher Fallahi

Individuals are allowed a premium tax credit (PTC) only for health insurance coverage purchased through the Marketplace for themselves or other members of their tax family.  Generally, the members of your tax family are the individuals included on your tax return: yourself, your spouse and your dependents.  A credit is not allowed for health insurance coverage you purchase outside the Marketplace.  Eligible Individuals who enroll in certain employer-sponsored coverage or government health coverage, like Medicare, Medicaid, or TRICARE, are not eligible for PTC.

 

Answer the yes-or-no questions here eligibility chart or use this interview tool to see if you qualify for the premium tax credit. 

 

In general, you may be allowed a PTC if you meet all of the following:

 

1- You or a family member enrolled in health insurance coverage through the Marketplace for one or more months of the year in which the enrolled individual is not eligible for non-Marketplace health coverage;

 

2- Your health insurance premiums for one or more of those same months are paid by the un-extended due date of your return, either through advance credit payments, payment by you, or payment by someone else;

 

3- You are within certain income limits;

 

4- You do not file a married filing separately (MFS) tax return, unless you meet certain criteria in the IRS Regulations, which allow certain victims of domestic abuse and spousal abandonment to claim the premium tax credit as MFS; and,

 

5- You cannot be claimed as a dependent by another person.

 

Income Criteria

To be eligible for the PTC, your household income must be at least 100%, but no more than 400% (or four times) of the federal poverty line (FPL) for your family size. There are two exceptions for individuals with household income below 100% of the FPL. The instructions to Form 8962 have more information about these exceptions. An individual who meets these income requirements must also meet other eligibility criteria.

 

The amount of the PTC is based on a sliding scale, with greater credit amounts available to those with lower incomes.  If the advance credit payments made on your behalf are more than the allowed PTC, you will have to repay some or all the excess.  If your projected household income is close to the 400% upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf.  You want to consider this carefully because if your household income on your tax return is 400% or more of the FPL for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.   

 

Other factors affecting the credit amount include the cost of available insurance coverage, your address, and your family size.

For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400% the FPL:

 

Federal Poverty Line for 2014 Returns

 

100% of FPL

.

400% of FPL

One Individual

$11,490

up to

$45,960

Family of two

$15,510

up to

$62,040

Family of four

$23,550

up to

$94,200

 

The FPL guidelines are sometimes referred to as the “federal poverty line” or FPL. The US Department of Health & Human Services (HHS) determines the FPL amounts annually. The government generally adjusts the income limits annually for inflation. The Federal Register publishes a chart reflecting these amounts at the beginning of each calendar year. You can find all of this information on the HHS website.

 

HHS provides three FPL guidelines: one for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the PTC, eligibility for a certain year is based on the most recently published set of FPL guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the PTC for 2014 is based on the guidelines published in 2013. The PTC for coverage in 2015 is based on the 2014 guidelines. 

 

Example:

The FPL for determining eligibility for the 2014 PTC f for a family of four living in Washington, DC, is at least $23,550 but no more than $94,200. That means the family of four could have household income of up to and including $94,200, which is 400 percent of $23,550, without losing eligibility for the premium tax credit.

 

Married Filing Separately

If you are married and you file your tax return using the filing status MFS, you will not be eligible for the PTC unless you meet certain criteria.  Certain victims of domestic abuse and spousal abandonment can obtain relief from this filing status limitation.  Details regarding this relief are in the instructions for Form 8962 and Publication 974

 

You may claim this relief from the joint filing requirement for no more than three consecutive years.  Domestic abuse includes physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate, or to undermine the victim’s ability to reason independently.  All the facts and circumstances are considered in determining whether an individual is abused, including the effects of alcohol or drug abuse by the victim’s spouse.  Depending on the totality of facts and circumstances, abuse of the victim’s child or other family member living in the household may constitute abuse of the victim. 

 

You are a victim of spousal abandonment for a tax year if, taking into account all facts and circumstances, you are unable to locate your spouse after reasonable diligence.

 

Generally, a married taxpayer who lives apart from their spouse for the last six months of the tax year is considered unmarried if they file a separate return, maintain a household that is also the main home of a dependent child for more than half the year and furnish more than half the cost of the household during the tax year.   

 

For help in finding out if you are eligible for the premium tax credit, check out the Premium Tax Credit Flow Chart (or via the accessible text) . Answering a A few yes-or-no questions can help you determine if you might be eligible for the credit.

 

 

Zaher Fallahi, CPA, Esq., is an IRS Debt Relief Lawyer, practices as Los Angeles Tax CPA and Orange County Tax CPA, and assists clients in resolving their tax controversies with respect to OVDP, FBAR, FATCA and tax audit.  Zaher Fallahi has been rated 10 out of 10 by Avvo  http://www.avvo.com/attorneys/90024-ca-zaher-fallahi-1955056.html  , and was named a top tax attorney  http://www.ocbar.org/AllNews/NewsView/tabid/66/ArticleId/1631/Coast-Magazine-Names-OCBA-Members-Top-Attorneys.aspx  .  About 1.8% of the US lawyers are also CPAs, and Zaher Fallahi is proudly one of them.  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), e-mail taxattorney@zfcpa.com

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