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How to get a premium tax credit for your health insurance

Are you due a tax credit to help pay your health insurance premiums? Now's the time to get it.

Your 2016 tax return is likely due by April 15, but you can file any time and probably want to.

Note that tax credits don’t apply to workplace health plans. If you buy your health insurance at work, you don’t need to worry about these special forms for filing taxes.

If you buy individual or family health insurance on your own, here's what you need to do to get your money as quickly as possible.

Determine whether you are eligible for a premium tax credit

Health insurance premium tax credit

You are not eligible for health insurance through an employer or a government-run program such as the Veterans Administration, Medicare or CHIP.

You may be eligible for a premium tax credit if you meet the following criteria:

  • You bought health insurance for 2016, for at least one month of the calendar year, through the government-run marketplace in your state. This is a must.
  • Your income falls within the eligibility limits, at least 100 but no more than 400 percent of the federal poverty line for your family size.  For 2016 the income limits are from $11,770 up to $47,080 for an individual; $15,903 up to $63,720 for two; and $24,250 up to $97,000 for a family of four.
  • You do not file a "Married Filing Separately" return.
  • No one else can claim you as a dependent on his or her taxes.
  • You did not elect to get the credit applied to the monthly premiums you paid for the health insurance you bought through the healthcare marketplace in your state.

You need two new forms when filing your taxes

Next you need to file a tax return.

When preparing your taxes, there are two forms you will need:

  1. 1095-A.
  2. Premium Tax Credit form, Form 8962.

If you bought health insurance through the marketplace, you should have received your Form 1095-A in the mail by the end of January. If you didn't receive your 1095-A or you have questions about it, contact the health insurance marketplace where you bought your coverage.

The 1095-A is a brand-new document this year, notes Perlman.

The form includes the information you need to file your taxes and apply for your tax refund. It includes information about members of your household, the policy number of the plan you bought, the starting and ending dates of your coverage, and your total monthly health insurance payments.

Form 8962 is the one you use to calculate how much credit you are entitled to, Perlman says. The Affordable Care Act bases the size of your premium tax credit on a sliding scale. The lower your income, the larger your credit amount. The higher your income, the lower the amount of your credit.

How big will the credit be? It depends on how much you owe, if any, in taxes and whether you used any of what you are eligible for to help pay your monthly premiums. The credit caps the amount you pay for health insurance at 2.04 percent to 9.69 percent of your household income, depending on how much that income is. A tax program or preparer can calculate it for you. It could be a couple of hundred dollars or a couple of thousand dollars depending on your income and how much you paid in premiums.

Here’s more about the premium tax credit from the IRS.

You must file a tax return to get your premium tax credit

If the amount of the credit to which you’re entitled is more than the amount you owe in taxes, you will receive the difference as a refund once you file your taxes, Perlman says. If you do not owe any taxes, you get the full amount.

Because you had to estimate your income when you bought health insurance, you may have earned more money than you thought and took a larger subsidy than you were entitled to. In this case, you will have to pay back the amount of the subsidy that is greater than what you were eligible for.

It's also possible that your family circumstances changed over the year. Changes to your family's income or size could affect how much credit you will receive when you file your tax return. The changes could increase your refund or balance due or they could decrease it. The IRS reported in 2016 that around 1.8 million, 51 percent, of people who received an advanced premium tax credit in 2014 had to repay a portion of the subsidy back. The average repayment amount was $860.

You may not need to file taxes if your income falls below the filing threshold. However, you will need to file a return in order to get your credit, Perlman notes.

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