Asked by Randell Baley on May 20, 2024
Verified
Assume a taxpayer is qualified to receive a premium tax credit.Explain how to calculate the amount of the credit.
Premium Tax Credit
A refundable tax credit for eligible individuals and families who purchase health insurance through the marketplace.
Credit Calculation
The process of determining the amount of credit that can be claimed by an individual or entity, often related to tax credits or financial rebates.
- Comprehend the computation of the premium tax credit along with the elements that influence the amount of the credit.
Verified Answer
TS
tsuyoshi shibataMay 21, 2024
Final Answer :
The premium tax credit is equal to the lesser of:
• The premium for the insurance obtained from the Marketplace
• The premium for the applicable second lowest cost silver plan (SLCSP)minus the taxpayer's contribution amount.
The Marketplace premium amount and the SLCSP amount are provided to the taxpayer on a Form 1095-A provided by the Marketplace.
The taxpayer's contribution amount is determined with reference to an IRS Table (provided in Appendix B to Chapter 9).The taxpayer must first determine a percentage calculated as:
[Taxpayer household income/the Federal Poverty Level for the applicable family size]
Using that percentage,the taxpayer obtains the applicable figure from the IRS Table (in Appendix B to Chapter 9).The applicable figure is multiplied by the taxpayer's household income to determine the taxpayer's contribution amount.The contribution amount is subtracted from the SLCSP premium.
• The premium for the insurance obtained from the Marketplace
• The premium for the applicable second lowest cost silver plan (SLCSP)minus the taxpayer's contribution amount.
The Marketplace premium amount and the SLCSP amount are provided to the taxpayer on a Form 1095-A provided by the Marketplace.
The taxpayer's contribution amount is determined with reference to an IRS Table (provided in Appendix B to Chapter 9).The taxpayer must first determine a percentage calculated as:
[Taxpayer household income/the Federal Poverty Level for the applicable family size]
Using that percentage,the taxpayer obtains the applicable figure from the IRS Table (in Appendix B to Chapter 9).The applicable figure is multiplied by the taxpayer's household income to determine the taxpayer's contribution amount.The contribution amount is subtracted from the SLCSP premium.
Learning Objectives
- Comprehend the computation of the premium tax credit along with the elements that influence the amount of the credit.