When you apply for health coverage, you will be asked to estimate your income for the upcoming year. If you earn less than 400% of the Federal Poverty Level (FPL), you could get financial help to reduce the cost of your monthly health insurance premium. To see a chart of FPL levels for the current year, click here.
If you qualify, you can choose to take these premium tax credits either:
A) in advance, so you pay less each month;
B) at the end of the year when you file your taxes; or
C) as a combination of A and B.
If your income turns out to be different than your estimate, and you get more help in advance than you are eligible for, you may have to pay some, or all, of your premium tax credit back when you file your income taxes the following year. Depending on your household income, there might be a limit to the amount you could have to repay (see chart below).
If you over-estimate your income and and take less of your available APTC amount, the difference will be reconciled when you file your taxes.
Please report income changes to Vermont Health Connect during the year, when they happen. If you don’t report changes of income during the year, and the income you report on your taxes is more than 400% FPL (see FPL chart), you will need to pay back the APTC you got that year.
Even if your income is under 400% FPL, you might owe some of your tax credit back at the end of the year if you don’t report income changes. This could also result in something called “APTC exhaustion”, which can happen if you have a mid-year income change. To avoid this, you can choose to pay your full monthly premium each month through the end of the year. When you file your taxes for that year, you can claim your Premium Tax Credits as a lump sum payment for the entire year. To learn more about APTC exhaustion, click here.
If you think your household income will be close to 400% FPL, you could also wait until you file your taxes to take all, or some, of the premium tax credit when you file your tax return.
If your employer helps you pay for health coverage through Vermont Health Connect, you should use the amount you get from your employer to help pay for your monthly premium and select less of the advance premium tax credit that is available to you.