An Advance Premium Tax Credit (APTC) is money from the federal government that helps lower the cost of your health insurance. It goes straight to your insurance company each month. That means you pay less for your monthly premium.
You do not have to wait until tax time to get this help. If you qualify, you can use the tax credit right away to make your plan more affordable.
How APTC lowers your monthly cost
When you enroll in a plan through the Health Connector, you can choose how much of your tax credit to use each month. Here is how it works:
- The tax credit is sent directly to your insurance company.
- The credit is applied to your monthly premium.
- You pay less out of your own pocket.
Your APTC is based on an estimate
Your APTC amount is based on the income you tell us when you apply. Because it uses the income you expect to earn, it is an estimate.
Real life changes, though. Your actual income for the year is often a little higher or lower than what you first reported. That is normal.
Your final tax credit is set at tax time
The government does not decide your final tax credit until you file your federal taxes for the year. That final number is based on your actual income for the whole year.
When you file, the government compares two things:
- The amount of APTC you used during the year.
- The amount you actually qualified for.
This comparison decides whether your advance credit was the right amount.
What this means for you
Your income during the year affects what happens at tax time:
- If you used more credit than you qualified for, you may have to pay some of it back.
- If you used less credit than you qualified for, you may get more money back on your tax return.
Choosing how much to take in advance
You decide how much of your credit to use each month. This choice comes with a trade-off.
Take more in advance
- You pay a lower premium each month.
- But you may owe some money back if your income ends up higher than you estimated.
Take less in advance
- You pay a higher premium each month.
- But you lower your chance of paying money back. You may even get more back at tax time.
Neither choice is wrong. If your income is hard to predict, taking less in advance can mean fewer surprises at tax time.
Who qualifies for APTC
APTC is figured out for your whole tax household. The amount you may qualify for depends on a few things:
- Your household income
- Your family size
- Where you live
- The cost of the second-lowest cost Silver plan available to your household
The Silver plan is one of the plan levels offered through the Health Connector. The second-lowest cost Silver plan is used as a benchmark to help set your credit amount.
Help your estimate stay accurate
The closer your estimate is to your real income, the fewer surprises you will have. Tell the Health Connector right away when something changes, such as your:
- Household income
- Job status
- Family size
- Home address
Reporting changes early helps us adjust your credit during the year. That may lower the chance you will owe money back later.