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How Premium Tax Credits Work

The premium tax credit amount is calculated based on the following factors:

  • Your household’s total expected income for the year (projected annual income or PAI).
  • The total number of people in your tax household that enroll in private health insurance through MNsure.
  • The premium amount of the second-lowest cost silver plan available through MNsure in your area. This also called the “benchmark” plan. (You can choose to enroll in plans that cost more than the benchmark plan.)
  • The maximum percentage of household income that can be spent on the cost of the benchmark plan's premiums. Under the new American Rescue Plan it is a maximum of 8.5% for plan years 2021 and 2022. (Before the American Rescue Plan it was a maximum of 9.83%.) See frequently asked questions about the expanded benefits through the American Rescue Plan.

    Also, because of the expanded benefits under the American Rescue Plan, eligibility for tax credits is no longer limited by household income. Before the American Rescue Plan, households with incomes above 400% of the federal poverty level were not eligible for tax credits. See the federal poverty guidelines based on family size.

Using Your Tax Credit

You can use the tax credit in two different ways: 

  • Save money now and get the financial help in advance (advanced premium tax credit, or "APTC") to lower your monthly premiums. (*Note: new enhanced benefits are not advanceable until later this year.)
  • Save money later and wait until you file your federal taxes to get a premium tax credit ("PTC") added to your tax refund.

*MNsure’s systems are currently being updated to make the enhanced credits through the American Rescue Plan available to you in advance, so the insurance company you enroll with can deduct them from your monthly premium if you choose. In the meantime, know that any tax credits you are eligible for but not able to collect in advance will be provided to you by way of your tax return. These enhanced benefits are retroactive to your first date of coverage through MNsure in 2021.

Reporting Premium Tax Credits

If you enrolled in a plan with advanced premium tax credit you will need to file the IRS Form 8962 with your federal income tax return for that year and make sure the amount of tax credit you received in advance matches with the final premium tax credit calculation. This is called reconciling.

For example:

  • If you use more advanced premium tax credit than you qualify for based on your final yearly income, you must repay the difference when you file your federal income tax return.
  • If you use less advanced premium tax credit than you qualify for, you’ll get the difference as a refundable credit when you file your taxes.
  • You can choose to claim the premium tax credit in one lump sum when you file your federal income tax return.

See more information about reporting or claiming the premium tax credit.

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