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How do tax credits work?

How tax credits save you money

When you apply through Maryland Health Connection, you’ll find out if you qualify for a tax credit that lowers your cost to enroll in a private health plan. We’re the only place where you can get this kind of financial help with your insurance costs.

How does the premium tax credit work?

The amount of your premium tax credit depends on your household size and estimated income for the plan year. You can apply some or all of the tax credit to your monthly insurance premium payment, or wait and take the credit when you file your taxes for the year:
 

Dollar Bill 1

Save money now: Use the tax credit in advance to lower your monthly insurance premium.

Example: If you qualify for a tax credit of $100/month, and your plan usually costs $300/month, you can pay $200/month instead.

Dollar Bill 2

Save money later: Get the tax credit when you file your taxes for the year.

Example: If you qualify for a tax credit of $100/month for your 2017 plan, you can wait and get the total $1200 for the year when you file your 2017 tax return.

Who qualifies for a tax credit?

You may qualify for a tax credit in 2017 if your income is less than $47,520 for an individual or less than $97,200 for a family of four.

You are not eligible for a tax credit if you are eligible for Medicaid or have access to affordable coverage through your job.

You must file taxes to get the tax credit, even if you would not usually file. You can file taxes this year, even if you didn’t file taxes last year.

Remember to tell us about any changes in your income or household
It’s important to report any changes in your income or household size to Maryland Health Connection as soon as possible, because these changes may mean your tax credit will increase or decrease.
Important: If the household or income information in your Maryland Health Connection application isn’t correct, and you receive more tax credit than you’re due, you will have to pay that money back to the IRS when you file your taxes for the year. This is called “reconciling” the advance payments of the premium tax credit based on your actual yearly income.

Frequently Asked Questions

Yes, if you meet the following criteria:

  1. You are not eligible for qualifying health coverage, such as affordable employer-sponsored coverage, or a government program, such as Medicaid.
  2. You are a Maryland resident and a citizen or lawful resident of the United States, and not incarcerated (other than pending final disposition of charges).
  3. Your household income is between 100% and 400% of the federal poverty level (for an individual, between $12,060 and $47,520; for a family of four, between $24,600 and $97,200, in 2017).
  4. You enroll in coverage through Maryland Health Connection.

You must also file taxes to get the tax credit, even if you would not usually file (for example, if your income is lower than the amount in which people are required to file taxes). You can file taxes this year, even if you didn’t file taxes last year. You can also claim tax dependents on your taxes this year that you may not have previously claimed. Anyone in your household who is not claimed as a tax dependent this year must file taxes to receive a tax credit. If you do not need health coverage but your tax dependents do, you can get a tax credit for them if you file taxes.

If you are married and want to get the tax credit, you must file taxes using the “married filing jointly” tax status for this year, unless you qualify to file taxes as the “Head of Household” or you meet special circumstances, including if you are the victim of domestic violence. If you think you meet special circumstances, you should contact Maryland Health Connection at 1-855-642-8572 (TTY: 1-855-642-8573) to proceed with your application.

Additionally, you must not have failed to reconcile tax credits you received from a previous year in your annual tax filing.

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Your tax credits will be paid monthly, directly to the health insurance company that you enrolled with through Maryland Health Connection. You may also choose to receive them at the end of the year through your annual tax filing.

During the year, it’s important to report changes in your income or household size to Maryland Health Connection as soon as possible. You can adjust your tax credit so you don’t wind up owing money or getting a big refund on your next tax return.

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7 people found this faq useful.

Yes. Although the tax credit is paid directly to an insurer on a monthly basis, it is in fact a tax credit that must be claimed on your annual income tax return.  Maryland Health Connection will provide you with IRS Form 1095-A by January 31 that you will use to help file your annual income tax return.

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No, the Affordable Care Act prohibits married couples who file their taxes separately, rather than jointly, from receiving premium tax credits. (Married couples are not required to file taxes or file their taxes jointly to be determined eligible for Medicaid.)

  • If you’re married and will file a joint federal tax return for the year you want coverage: You’re eligible for a premium tax credit and other savings if you qualify based on your income and other factors.
  • If you’re married and will file separately for the year you want coverage: You can enroll in a Maryland Health Connection plan together but you’re not eligible for a premium tax credit or other savings, and you may have to complete a separate application.
  • If you’re married and plan to file as head of household for the year you want coverage: You can say you’re "unmarried" on your Maryland Health Connection application. You’re then eligible for a premium tax credit and other savings if you qualify based on your income and other factors. See IRS rules for filing as head of household.
Important:
There’s an exception for people who are victims of domestic abuse. If you’re living apart from your spouse and can’t file a joint return with your spouse as a result of domestic abuse, you’re allowed to state on the application that you’re unmarried. This will allow Maryland Health Connection to determine if you qualify for premium tax credits and cost-sharing reductions. These savings depend on your household income and family size.
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Yes. There is no requirement to have filed a tax return for any prior year in order to qualify for a premium tax credit. However, there is a requirement to file a return in the year in which you receive a premium tax credit (e.g., if a premium credit is received for 2016, the taxpayer must file a 2016 tax return in spring 2017).

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