Affordable Care Act
Premium Tax Credit
1
Definitions
• Affordable Care Act
o A combination of laws passed to expand health care coverage options
while lowering the cost of health care and requiring many Americans to
obtain health insurance.
• The Marketplace
o Online or over the phone
1. health coverage options
2. compare health insurance plans based
3. choose a plan; and purchase coverage.
2
Step 1
• Intake and Interview Form
• Did the Taxpayer, Spouse, and all dependents have
Minimum Essential Coverage (MEC)?
• The Taxpayer answers:
o Yes: Check yes on line 61 of the 1040, move to step 6
o No: Move on to step 2
In TaxWise
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Wait, What is MEC?
4
MEC Does Not Include
5
Step 2
• Is this tax payer exempt from coverage gap fees?
6
More Exemptions
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TaxWise Form 8965
• Part 1 = Exemptions obtained through the
marketplace
• Part 2= Everyone will answer
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TaxWise Form 8965 Cont.
• Part 3 = All other exemptions.
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Step 3
Shared Responsibility Payment
• The greater of:
o 1% of household income above the filing threshold, or
o Flat dollar amount
• $95 per adult, $47.5 per child
• Max of $285 for a family
o But capped at the cost of the national average premium for a bronze
level health plan available through the marketplace.
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Filing Thresholds
Filing Status
Age
Must file if gross income
exceeds
Single
Under 65
$10,150
65+
$11,700
Under 65
$13,050
65+
$14,600
Under 65 (both spouses)
$20,300
65+ (one spouse)
$21,500
65+ (both spouses)
$22,700
Married Filing Separately
Any age
$3,950
Qualifying Widow(er)
Under 65
$16,350
65+
$17,550
Head of Household
Married Filing Jointly
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Shared Responsibility
Payment
• The greater of:
o 1% of household income above the filing threshold, or
o Flat dollar amount
• $95 per adult, $47.5 per child
• Max of $28
o But capped at the cost of the national average premium for a bronze
level health plan available through the marketplace.
• Example:
o Joy is single with no dependents. Joy’s household income is $30,450. Her
filing threshold is $10,150.
1. $30,450-10,150 = $20,300
2. $20,300 * 1% = $203
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2014 National Average
Bronze Plan Premium
Number of months without
MEC or exemption
Family Size
1
2
3
4
5+
1
204
408
612
816
1,020
2
408
816
1,224
1,836
2,448
3
612
1,224
1,836
2,448
3,060
4
816
1,632
2,448
3,264
4,080
5
1,020
2,040
3,060
4,080
5,100
6
1,224
2,448
3,672
4,896
6,120
7
1,428
2,856
4,284
5,712
7,140
8
1,632
3,264
4,896
6,528
8,160
9
1,836
3,672
5,508
7,344
9,180
10
2,040
4,080
6,120
8,160
10,200
11
2,244
4,488
6,732
8,976
11,220
12
2,448
4,896
7,344
9,792
12,240
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Shared Responsibility
Payment
• The greater of:
o 1% of household income above the filing threshold, or
o Flat dollar amount
• $95 per adult, $47.5 per child
• Max of $28
o But capped at the cost of the national average premium for a bronze
level health plan available through the marketplace.
• Example:
o Joy is single with no dependents.
o Her flat dollar fee is $95, her 1% of household income fee is $203.
o Her annual national average premium for bronze level coverage for 2014
is $2,448
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Step 4
Back to Taxpayers with Coverage
• Did the taxpayer purchase MEC through the
marketplace?
o Yes – figure the premium tax credit
o No – you are done
• Premium Tax Credit (PTC)
o Helps pay for coverage purchased through the marketplace in the form
of a refundable tax credit.
o Must file a joint return if married
o Must be between 100%-400% of the federal poverty level
o Taxpayer claiming PTC cannot be a dependent
• Advanced Premium Tax Credit (APTC)
o When health insurance was purchased, a projection of 2014 family size
and income was made and the APTC was paid in advance to the health
insurance company.
o This helps lower the taxpayers monthly payment
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Federal Poverty Lines
• Use the taxpayers Modified adjusted gross income
(MAGI) to determine eligibility
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MAGI
• Modified adjusted gross income is
adjusted gross income (AGI)
excluded foreign income
nontaxable social security
tax-exempt interest
MAGI
+
+
+
+
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Form 8962 in TaxWise
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APTC
• If there is no advancement of the PTC or only part
of the PTC is claimed in advance, the remainder
can be claimed as a refund on the tax return.
• If excess PTC is claimed in advance, it must be paid
back.
APTC Repayment Limits
Income (as % of Fed
Poverty Line)
Single filing status
All other filings statuses
Less than 200%
$300
$600
200% to 299%
$750
$1,500
300% to 399%
$1,250
$2,500
400% and above
No limit
No limit
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Form 8962 Cont.
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Outline of Steps
1. Do you have full year MEC?
1.
2.
Yes – Move to step 4
No – Move to step 2
2. Are you exempt from purchasing coverage?
1.
2.
Yes – complete form 8965
No – Move to step 3
3. Figure the Shared Responsibility Payment
1.
That is the last step for taxpayers without coverage
4. Did the taxpayer purchase MEC through the
Marketplace?
1.
2.
Yes – Move to step 5
No – Done
5. Figure the Premium Tax Credit – Form 8962
1.
That is the last step for taxpayers with MEC
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For more training
• http://eitcoutreach.org/aca/webinar
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