How to Calculate the Net Premium Tax Credit on Form 8962

The Premium Tax Credit (PTC) is a refundable credit that helps individuals and families afford health insurance purchased through the Health Insurance Marketplace. If you received advance payments of this credit (APTC) to lower your monthly premiums, you must file Form 8962 with your tax return. This form reconciles the advance payments with the actual credit you qualify for based on your final income. The result determines if you are owed an additional credit or must repay some of the assistance.

Eligibility for the Premium Tax Credit

To qualify for the Premium Tax Credit, you or a family member must have enrolled in a health insurance plan through the official Health Insurance Marketplace. Coverage obtained through an employer or directly from an insurance company outside the Marketplace does not qualify. You also cannot be claimed as a dependent on someone else’s tax return.

Your household income must be at least 100% of the federal poverty line (FPL) for your family size. For tax years 2021 through 2025, the 400% income cap has been temporarily removed, allowing more people to qualify. Household income for this purpose is your Modified Adjusted Gross Income (MAGI), which is your Adjusted Gross Income (AGI) plus certain non-taxable income like tax-exempt interest and the non-taxable portion of Social Security benefits. Your MAGI includes that of your spouse and any dependents required to file a tax return.

You cannot be eligible for other minimum essential coverage. This includes most employer-sponsored plans that are considered affordable and provide minimum value, and government-sponsored programs like Medicare, Medicaid, or TRICARE. If you are eligible for such a plan, you cannot claim the PTC, even if you do not enroll in it.

Information Needed to Complete Form 8962

The primary document you need to gather is Form 1095-A, Health Insurance Marketplace Statement, which you should receive from the Marketplace by early February. This form provides a month-by-month breakdown of your health plan that is necessary for accurately completing Form 8962. You should not file your tax return until you have this form.

Form 1095-A contains three pieces of information detailed in its columns. Column A shows the total monthly premium for the health plan you were enrolled in. Column B lists the premium for the second-lowest cost silver plan (SLCSP) available to your household, which is a benchmark figure used to calculate your tax credit and may not be the same as the premium for the plan you chose.

Column C of Form 1095-A reports the amount of the Advance Premium Tax Credit (APTC) that was paid directly to your insurance company each month to lower your out-of-pocket premium costs. In addition to Form 1095-A, you will also need your tax family size and your household’s Modified Adjusted Gross Income (MAGI).

Calculating Your Credit on Form 8962

In Part I of Form 8962, you will report your family size, MAGI, and your household income as a percentage of the federal poverty line, which you determine using tables in the form’s instructions. Using this information, you will calculate your annual and monthly contribution amount on lines 8a and 8b. This figure represents the amount you are expected to contribute toward your health insurance premiums for the year, and the calculation is based on your income and a sliding scale percentage.

In Part II, titled “Premium Tax Credit Claim and Reconciliation,” you will use the monthly data from your Form 1095-A. For each month you had coverage, you will enter the premium amount from Column A, the SLCSP premium from Column B, and the advance credit payments from Column C. The form then guides you to calculate your allowable premium tax credit for each month. This is the lesser of your actual premium or the SLCSP premium, minus your required monthly contribution, and the total is entered on Line 24.

Reconciling the Credit on Your Tax Return

The final step is to compare your total premium tax credit from Line 24 with the total advance payments from Line 25. The total for Line 25 is the sum of the amounts from Column C of your Form 1095-A. This reconciliation determines the final impact on your tax return.

If your total PTC on Line 24 is greater than the advance payments on Line 25, the difference is your Net Premium Tax Credit. This amount is entered on Line 26 of Form 8962 and is a refundable credit. You will carry this figure to Schedule 3 (Form 1040), where it can increase your tax refund or lower the tax you owe.

Conversely, if the advance payments on Line 25 are more than the PTC you are eligible for on Line 24, you have an Excess Advance Premium Tax Credit that must be repaid. You calculate this excess amount in Part III, and the amount you must repay may be limited based on your household income as a percentage of the federal poverty line. This repayment amount is an additional tax reported on Schedule 2 (Form 1040).