Computing The Maximum Credit Repayment
For years other than 2020, if the advance premium tax credit provided by an insurance Marketplace exceeds the amount the taxpayer qualifies for, then the difference is reconciled on the taxpayer’s return (Form 8962) for the year and the excess repaid on the tax return. However, for taxpayers with household income less than 400% of the poverty level, the maximum repayment is limited to the amount determined from the table below. The amounts are inflation adjusted in $50 increments. (IRC 36B(f)(2)(B)) There is no repayment limit for taxpayers whose household income is 400% or more of the poverty level.
Example – Computing the Maximum Credit Repayment – Jack is married with one child and the family’s household income for 2024 is $56,000. Jack purchased his family’s health insurance through his state’s insurance Marketplace. Using his family’s household income, we find from the poverty guideline chart that Jack is in the “at least 200% but less than 300%” category. Therefore, Jack’s maximum repayment would be $1,8000 for 2024. If the Marketplace credited Jack’s insurance carrier with $2,500 more than Jack qualified for, then Jack, instead of having to repay the $2,500, would only be liable for $1,800 on his tax return.
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“ Example – No Cap on Credit RepaymentAmount – Let’s say that Jack from the previous example received a year-end bonus that caused his income to increase so that his actual household income for 2023 ended up at 405% of the poverty level. In this case Jack’s repayment of the excess credit would be $2,500, since he does not benefit from the repayment limitation rule because his household income was 400% or more of the poverty level. ”
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