What is the Form 8962 Premium Tax Credit?

The Premium Tax Credit is a refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange. The size of your Premium Tax Credit is based on a sliding scale. Those with a lower income get a larger credit to help cover the cost of their insurance.

When you enroll in Marketplace insurance, you can have the Marketplace compute an estimated credit paid to your insurance company to lower what you pay for your monthly premiums, known as advance payments of the Premium Tax Credit. Or, you can choose to get all of the benefits of the credit when you file your tax return for the year.

If you choose to have advance payments of the Premium Tax Credit made on your behalf, you will reconcile the amount paid in advance with the actual credit you compute when you file your tax return for the year. Either way, you will complete Form 8962, Premium Tax Credit, and attach it to your tax return for the year.

The credit is “refundable” because, if the amount of the credit is more than the amount of your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund. However, if advance credit payments were made to your insurance company and your actual allowable credit on your return is less than your advance credit payments, the difference, subject to certain repayment caps, will be subtracted from your refund or added to your balance due for tax years.