The Affordable Care Act provides a new tax credit to help you afford health coverage purchased through the Marketplace. Advance payments of the tax credit can be used right away to lower your monthly premium costs. If you qualify, you may choose how much advance credit payments to apply to your premiums each month, up to a maximum amount.
If the amount of advance credit payments you get for the year is less than the tax credit you’re due, you’ll get the difference as a refundable credit when you file your federal income tax return. If your advance payments for the year are more than the amount of your credit, you must repay the excess advance payments with your tax return.
For some people that is hard to estimate their tax household’s Modified Adjusted Gross Income, so they can choose not to take all of the offered tax credit in case their income is higher than they expected. In any event, you retain the option to choose not to take this tax credit in advance.
If you do not apply for financial assistance when you enroll in a Marketplace plan, you may qualify for a tax credit at tax filing based on the information you provide to the IRS. If so, this money is provided to you at the end of the year as a refund or reduction in the amount of taxes you owe when you file your tax return.