Should I claim a premium tax credit in advance or at the end of the year or some of both?

Individuals with no coverage | How Premium Tax Credits And Cost-Sharing Reductions Work |

That’s up to you. You can have 1/12 of your annual premium tax credit paid directly to your health plan each month to reduce your monthly premium right away. Or, if you can afford to, you can pay the entire health plan premium yourself up front and collect the premium tax credit in a lump sum next year when you file your tax return. Or you can have some of the tax credit paid directly to your insurer in advance but save some to be collected at year end.

Keep in mind that when you apply for the premium tax credit this fall, during open enrollment, you won’t necessarily know for sure what your income will be for the next year, so you will apply based on your best estimate of your income. Later, when you file your tax return, the IRS will compare your actual income to the amount of premium tax credit you claimed in advance. If you underestimated your income and claimed too much premium tax credit, you might have to pay back some or all of the difference. If you didn’t receive all of the premium tax credit you’re entitled to during the year, you can claim the difference when you file your tax return.

If you’re uncertain about your income, it’s also important to remember that you can modify the amount of premium tax credit during the year if your income changes. So, for example, if you are unemployed now, you can apply for a premium tax credit based on your current household income; then if you get a new job during the year, you must report this increase in income to the Marketplace within 30 days, which may reduce the amount of premium tax credit you’re receiving at that time. (26 C.F.R. § 1.36B-4; 45 C.F.R. §§ 155.305, 155.330; IRS, Premium Tax Credit: Claiming the Credit and Reconciling Advance Credit Payments.)

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