Health Insurance, Taxes and You

If you got a premium subsidy to help pay your health insurance premiums, you’ll need to file a federal income tax return.

Premium subsidies are also called Premium Tax Credits. This is how they work:

• The federal government pays an estimated Premium Tax Credit to your insurance company each month.
• The amount is based on the information you gave when you applied.
• The IRS will decide if you received the right amount when you file your tax return.
• If you didn’t get the right amount, you might get money back or you might owe money.

If you got a Premium Tax Credit (subsidy), you will need Form 1095-A in order to file your tax return. The form should be sent to you from Vermont Health Connect in January. Don’t file your tax return until you get this form. You may get more than one form if you reported a change to Vermont Health Connect during the year.

Find out more about Form 1095-A, including how to get help with appeals, on our website.

Vermont Health Connect paid an estimated Premium Tax Credit (subsidy) to your insurance company based on your projected income. If your income at the end of the year is different from your projected income, you may have to pay some Premium Tax Credit back when you file your taxes. The IRS decides the correct amount of Premium Tax Credit based on your household’s income. The law does not make exceptions for your innocent mistakes or mistakes made by Vermont Health Connect.

If you have to repay some or all of the Premium Tax Credits that were paid to lower the cost of your Vermont Health Connect insurance plan, the amount you have to repay will be added to the tax you owe.

There is a limit on how much people with lower incomes have to repay. The limits are based on the income shown on your tax return.

Small changes in your income can make a big difference in your premium tax credit. If your income is just $1 over the limit, you are not eligible for a premium tax credit. The good news is you might be able to qualify.

To lower your income you might be able to:

• Contribute to a traditional individual retirement account (IRA)
• Contribute to a Health Savings Account (HSA)
• Contribute to an employer-sponsored retirement account, for example a 401(k)

You can make IRA and HSA contributions up to the tax filing deadline. You can make 401(k) contributions up to December 31.

Get personal advice before you act! The IRS has detailed rules. Talk to a tax professional to make sure you qualify to lower your income in this way.

The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs provide free help with taxes during tax season. TCE is also called AARP Tax Aide. Many people can also use online software to file your federal return for free. Learn more on our Tax Filing Help page.

The IRS has three forms for reporting information about health insurance:

• Form 1095-A, Health Insurance Marketplace Statement (Vermont Health Connect sends this form to households who got help paying for their VHC plan.)
• Form 1095-B, Health Coverage (Health insurance companies or government agencies like Medicaid will send this form to you.)
• Form 1095-C, Employer-Provided Health Insurance Offer and Coverage (Employers with 50 or more full-time employees use this form to report information about health coverage they offer to employees.)

See our How to Apply page to learn more.

The Taxpayer Advocate Service website also has helpful information about health insurance and taxes.