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Repayment Limits on Excessive Tax Credits

Understanding Repayment Limits for Excess Premium Tax Credits on Marketplace Insurance Plans


Navigating the complexities of health insurance can be challenging, especially when it comes to understanding how premium tax credits work under the Marketplace plans. One of the critical aspects to be aware of is the repayment limits if you end up receiving more tax credits than you're eligible for. Let’s break down what these limits are, how they work, and what you need to know to avoid unexpected financial burdens.


What Are Premium Tax Credits?

Premium tax credits (often referred to as Advanced Premium Tax Credits or APTC) are designed to help lower-income individuals and families afford health insurance through the Marketplace. The amount of the credit you receive is based on your estimated household income for the year. These credits can be applied directly to your monthly insurance premium, reducing the amount you pay out of pocket.

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When Do Repayment Limits Come Into Play?

Repayment limits come into play if you end up earning more than you estimated when you applied for your Marketplace plan. If your actual income for the year turns out to be higher than what you projected, you may have received more premium tax credits than you were eligible for. This discrepancy is reconciled when you file your federal income tax return.


How Much Will You Have to Repay?

The amount you may have to repay is subject to limits based on your household income relative to the federal poverty level (FPL). These limits are designed to protect lower-income families from significant financial hardship while helping ensure that repayment amounts are manageable, even if your income exceeds the initial estimates.


Here are the repayment limits for the 2023 tax year:

  • For Household Income Below 200% of the FPL

  • Individual: $350

  • Family: $700


  • For Household Income Between 200% and 300% of the FPL

  • Individual: $900

  • Family: $1,800


  • For Household Income Between 300% and 400% of the FPL

  • Individual: $1,500

  • Family: $3,000


  • For Household Income Above 400% of the FPL

  • No repayment limit; you may need to repay the entire excess amount of the premium tax credit received.


For the 2024 tax year, we expect the repayment limits to be similar.


To learn more about the FPL limits, check out our blog

Avoiding Excess Tax Credits

To avoid the stress of repaying excess tax credits, it's essential to keep your income information up-to-date with the Marketplace. Here are some tips:


  1. Report Changes Promptly: If you experience any significant life changes, such as a raise, a new job, or a change in household size, report these changes to the Marketplace as soon as possible. This can adjust your premium tax credits accordingly.


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  1. Estimate Income Accurately: Use all available information to estimate your income as accurately as possible when applying for your Marketplace plan. Consider factors such as bonuses, freelance work, and other sources of income.


  1. Review Mid-Year: Periodically review your income and compare it with the estimate you provided. If there's a significant discrepancy, update your information with the Marketplace.


What Happens If You Owe Repayment?

If you owe repayment for excess premium tax credits, this will be reconciled when you file your federal tax return. The amount owed will be added to your total tax liability for the year. If you can't pay the full amount due, the IRS offers various payment plans and options to help manage the repayment over time.


Understanding the repayment limits for excess premium tax credits is crucial for anyone with a Marketplace insurance plan. By staying informed and proactive about managing your income estimates and reporting changes promptly, you can avoid unexpected financial burdens and make the most of your health insurance coverage.


Remember, health insurance is vital, and while managing the financial aspects can be complex, resources and assistance are available to help you navigate these challenges effectively. Stay informed, stay updated, and ensure you have the coverage you need without the stress of unmanageable repayments.


Call Lion’s Pride Insurance at (801) 896-8377 or schedule a time to review your income

to help ensure that you are receiving the correct tax credits!

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