Form 1096-A, Health Insurance Marketplace Statement is issued to those who had Marketplace coverage during the tax year. Once furnished to an individual, Form 1095-A can be used for filing a tax return, to claim the premium tax credit, or to reconcile the credit on a tax return with advance payments of the premium tax credit.
Although not everyone will need this tax form, families and individuals with low income will use it to claim the premium tax credit.
What is premium tax credit?
The premium tax credit is a refundable tax credit to help those with low income to afford health insurance through the Health Insurance Marketplace. To qualify for this tax credit, the household income must be no more than 400% of the federal poverty line for the size of the household but it also must be at least 100%. Below, you can see the federal poverty line for up to 8 persons in a household.
|Federal Poverty Line*||Number of People in the Household|
The incomes above refer to the Modified Adjusted Gross Income, not the actual income or Adjusted Gross Income. Although both the MAGI and the AGI is the same for most people, there are a few differences. While AGI can be found on the tax return, MAGI must be calculated by adding a few deductions and adjustments. To calculate Modified Gross Income, you must add back if you claimed the following tax deductions.
- Rental losses
- IRA contributions
- Taxable Social Security payments
- Half of the self-employment taxes
- Passive income or loss
- Qualified tuition expenses
- Exclusion for adoption expenses
- Student loan interest or tuition
- Losses from a publicly-traded partnership
Also, there are a few points related to the federal poverty line. If the household income is below 138% of the federal poverty line and the state of residence has expanded Medicaid coverage, you can qualify for Medicaid based on income. However, if the income is below 100% of the federal poverty line, you nor the other people in the household won’t qualify for Medicaid or for savings on a Marketplace health coverage.
Once you know that you’re eligible for the premium tax credit, obtain Form 1095-A that is furnished to you by your health insurance provider and use it to claim this tax credit. Since it is a refundable tax credit, it can contribute to your tax refund if you owe no tax.