6 Myths about Premium Tax Credit !

I earlier posted a detailed article on premium tax credit for awareness about various features of this health related refundable tax credit. So, it looks like , there must be a myth buster post about this beautiful health related scheme of government that truly aids people and family with low income (no income limit till December 2025) any income as far as medical expense is concerned.

Six misconceptions about Premium Tax Credit

1.Premium Tax Credit is only available to low-income individuals and families

Yes, it was once upon a time , but the the American Rescue Plan of 2021 (ARPA) first temporarily expanded eligibility for the premium tax credit by eliminating the income limits for eligibility to Premium Tax Credits for tax year 2021 and tax year 2022. After that American Reduction Act further extended the no-income limit for PTC till the end of 2025. So as of now ,there is no income limit test for finding out the eligibility for PTC.So, it is available to levels of income , at least upto 2025.

2.Premium Tax Credit is only available to individuals and families who purchase health insurance through the marketplace

Premium Tax Credits are available to individuals and families who purchase insurance through the marketplace, but they are also available to those who purchase insurance outside the marketplace, as long as they meet the eligibility criteria.

3. Individuals and families who receive Premium Tax Credits will receive a check from the government

Premium Tax Credit is applied to the cost of the individual’s or family’s health insurance premium. They do not receive a check from the government.If you are confused about refundable , it means adjusted either at the marketplace as an advance PTC or you pay first to market place and then claim on your tax return

4.Premium Tax Credits are only available for a particular type of health insurance plan

PTC can be applied to various types of health insurance plan sold on the federal marketplace (also known as the Health Insurance Marketplace or healthcare.gov) are:

1. Bronze plan: This plan has the lowest monthly premium, but the highest out-of-pocket costs.
2. Silver plan: This plan has a higher monthly premium than a bronze plan, but lower out-of-pocket costs.
3. Gold plan: This plan has a higher monthly premium than a silver plan, but even lower out-of-pocket costs.
4. Platinum plan: This plan has the highest monthly premium, but the lowest out-of-pocket costs.
5. Catastrophic plan: This plan is only available to certain individuals and it has a low monthly premium but very high out-of-pocket cost.

All the plans in the federal marketplace are required to cover the same set of “essential health benefits.” However, the level of coverage can vary depending on the type of plan you choose.

5.Individuals and families who receive Premium Tax Credits will not have to pay taxes on credit

Premium Tax Credits can be availed in two forms – as an advance payment while enrolling with marketplace and will be reconciled when the individual or family files their taxes.Or , you can pay for the health plan and claim the credit determined by market place while filing tax return. Any advance credit payments will be reconciled with the credit claimed on the tax return.

6.Premium Tax Credits are permanent

The eligibility criteria and amount of Premium Tax Credits keep changing . In the past we saw the enactment Tax Cuts and Jobs Act (TCJA) modified the scheme and then American Rescue Plan ACT (ARPA) and then American Reduction Act brought changes in income eligibility . So, one can not say that every year the PTC rule regarding eligibility, amount of tax credit and manner of claiming the premium tax credit will remain same.