What You Need to Know About Tax Credits

Tax credits are meant to help keep the cost of Covered California health insurance plans low for individuals and families who meet certain income requirements. In order to qualify for tax credits, individuals cannot have affordable health care choices from their employer or government. 

There are two main types of tax credits that are available, including:

• Premium assistance, which is a federal tax credit that you receive at or before tax time to help make the amount that you pay for your health insurance each month lower. The amount of premiums tax credits that you receive before tax time is based on your income, where you live, and your tax household size.
• Cost sharing reductions will help to lower the amount that you have to pay when you visit a hospital or doctor or fill any prescriptions.  

If you are able to take advantage of any tax credits to help make your health insurance more affordable, you must file taxes. When you file your taxes, the IRS will check to make sure that you properly reported your income to Covered California. The IRS will also check to ensure that your family size has not changed. They will then compare the premium tax credits that you received during the taxable year with the premium assistance that you can qualify for based on your family size and actual household income that you report on your tax return in a process known as reconciliation. 

If your actual income was lower or if the size of your household increased, it is possible to qualify for more premium assistance than you actually received. If this applies to you, you may be able to get money back on your taxes. On the other side, if your income increased or your household decreased, you can qualify for less assistance than you originally received. 

Contact Sackett & Associates for all your Sonoma County health insurance needs and to ensure that you have the right amount of coverage, all at the right price.