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ikram1998
Level 2

Unemployment and Premium Tax Credit for 2021

Hello We have Health insurance thru Obamacare (health care market place). If me or my spouse received unemployment income any time during 2021 and we are filing joint return then what I heard was no matter what the actual income of the couple was they only count 133% of federal poverty line for the calculations of Premium Tax credit eligibility for 2021. If that is true, then all our Premiums we have been paying this year thru market palce should be returned back when we eventually file the 8962 form next year, Correct ?

10 Replies
JandKit
Employee Tax Expert

Unemployment and Premium Tax Credit for 2021

Hi IKRAM 1998,

 

The American Rescue Plan Act of 2021, enacted on March 11, 2021, suspended the requirement to repay excess advance payments of the premium tax credit (excess APTC)  for tax year 2020

If you already filed a 2020 return and reported excess APTC or made an excess APTC repayment, you don’t need to file an amended return or take any other action.

If you have not filed your 2020 tax return, here’s what to do:

  • If you have excess APTC for 2020, you are not required to report it on your 2020 tax return or file Form 8962, Premium Tax Credit.
  • If you’re claiming a net Premium Tax Credit for 2020, you must file Form 8962, Premium Tax Credit 

 

I was able to find no reference to the Premium Tax Credit for 2021. To date, there is no word as to the treatment of the Premium Tax Credit as related to unemployment received in 2021. I do submit this link for your reference.

It is an excellent questions and certainly worth the time and effort!

 

https://www.irs.gov/affordable-care-act/individuals-and-families/premium-tax-credit-claiming-the-cre...

 

JandKit

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CharlesO
Employee Tax Expert

Unemployment and Premium Tax Credit for 2021

Hi Ikram,

What changed in the Premium Tax Credit for 2020 due to the American Rescue Plan Act is that if you received excess advanced payments (the subsidy to reduce your premium) you will not be required to repay the excess.

IRS Premium Tax Credit 

So you won't get all of your premiums back but you will not be required to pay anything back. If your income was reduced in 2020 vs what you reported when you signed up for the income it is still possible that you paid too much and will get a credit on your return.

 

I hope this helps.

 

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ikram1998
Level 2

Unemployment and Premium Tax Credit for 2021

Hello Charles, Your answer was for the year 2020 taxes. But my question was specific to 2021 tax year that we will file in 2022. Can you pls answer that in that context ? 

AmeliesUncle
Level 12

Unemployment and Premium Tax Credit for 2021

Yes, for 2021 (and ONLY 2021) if you collect unemployment, your income will be considered as 133% of the Federal Poverty Level for purposes of calculation the Premium Tax Credit, regardless of your actual income.

bestselflife
Level 1

Unemployment and Premium Tax Credit for 2021

@AmeliesUncle do you have a reference for this? Thank you!

AmeliesUncle
Level 12

Unemployment and Premium Tax Credit for 2021


@bestselflife wrote:

@AmeliesUncle do you have a reference for this? Thank you!


Section 9663 of the American Rescue Act added/changed subsection (g) of Section 36B of the tax code.

JandKit
Employee Tax Expert

Unemployment and Premium Tax Credit for 2021

Here is information that may be helpful to you. It was found on the CMS website:

  • Consumers who received or were approved to receive UC for any week beginning during 2021 will be treated as if their household income is no greater than 133 percent FPL for purposes of PTCs or CSRs, as applicable.
  •  The taxpayer may be eligible for a premium tax credit (PTC) that covers the entire premium cost for the benchmark Marketplace plan for the whole household, regardless of the taxpayer’s actual household income amount.
  • Consumers who have received or been approved to receive UC for any week beginning during 2021 should return to HealthCare.gov after July 1 and resubmit their applications. *Please note that these new benefits are only available for 2021. Consumers who re-enroll into 2022 coverage may be determined eligible for less financial assistance due to the expiration of these benefits.

Website: https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/UC%2C%20APTC%2C%20and%20CSRs...

 

@bestselflife 

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Avaldrummer
New Member

Unemployment and Premium Tax Credit for 2021

Hello, 

Per the message below regarding individuals that received unemployment compensation for 2021:

  •  The taxpayer may be eligible for a premium tax credit (PTC) that covers the entire premium cost for the benchmark Marketplace plan for the whole household, regardless of the taxpayer’s actual household income amount.

Does this mean that the there will be no payback requirement of the PTC if the actual household income is substantially increased by the end of 2021?  I understand the PTC will be figured on no more than 133% of the FPL...but I am trying to understand if a payback of the subsidy will be required if the income increases to over 400% of the FPL.  

Thank you! 

 

AmeliesUncle
Level 12

Unemployment and Premium Tax Credit for 2021

Yes, if you collect unemployment in 2021, that applies (at least according to current law).

TaxSpec
Level 1

Unemployment and Premium Tax Credit for 2021

The American Rescue Plan Act of 2021 (ARPA) removed the “subsidy cliff” for 2021 and 2022 and allowed income earners above the 400% FPL to qualify for some subsidy assistance. Before the act, there was no assistance provided.

 

Suspension of repayment of the excess APTC applied to tax year 2020 only and means that taxpayers must repay excess APTC in 2021 after reconciling the payment using Form 8962.

 

Allowing all persons, regardless of income, to qualify for a PTC for premium amounts in excess of 8.5% means repayment amounts triggered by reconciliation will generally be less.

 

If the APTC exceeds the PTC, the taxpayer must generally repay the difference, as an additional tax. While the repayment is generally limited for those with income below 400% of the FPL, taxpayers with income at or above 400% of the FPL must repay the entire APTC. This “subsidy cliff” has caused many taxpayers with small amounts of additional income to face large unexpected tax bills. Courts have ruled that the IRS has no discretion to waive this repayment, regardless of circumstance.

Further information can be found here:

https://www.calt.iastate.edu/blogpost/reviewing-new-healthcare-options-2021-and-2022

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