Tax time is coming - reconciling subsidies

March 02, 2017
New Mexicans who received subsidies through the Exchange in 2016 should receive Form 1095-A, showing monthly dollar amounts of premium tax credits received throughout the year. (Instructions for Form 1095-A here.) The information is used to reconcile tax credit amounts on IRS Form 8962, which should be filed with the individual’s tax return.
Advanced premium tax credits are based on estimated income. Individuals eligible for subsidies at the time they enroll in health insurance on the Exchange may choose monthly advanced premium tax credits paid to their insurance company, which will lower their monthly premiums. Or, they can pay the full premium each month and claim the entire tax credit for the year on their tax returns, based on their income and filing status. Read more about premium subsidies here.
Credits paid in advance: Individuals who want to lower their monthly expenses may choose to have all or part of their estimated credits paid to their insurance company. Taxpayers will reconcile the estimated amount of their monthly premium credits with the actual credits due when they file their tax returns. If their income increases, they may have to pay the government back for all or a portion of the subsidies received. If income decreases, they may be entitled to a refund.

Credits claimed at tax time: Taxpayers who do not choose advance payments and those who became eligible for subsidies during the year due to income changes may receive a refund or lower their tax bill at tax time when they reconcile their credits.
Read more about the impact of income changes on premium tax credit reconciliation in an issue brief by the Kaiser Family Foundation.