State RegulationsTX specificDifficulty 2/5
A Texas resident received advance payments of the federal premium tax credit during the year. What is the enrollee required to do when the year is over?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under ACA Section 1401, the premium tax credit is a refundable credit that may be paid in advance directly to the insurer to lower the monthly premium, and the enrollee must file a federal income tax return to reconcile what was advanced with the credit the household actually qualifies for. The practical advice for an agent is to tell clients to report life changes, such as income, household size or gaining employer coverage, during the year, because failing to do so produces a repayment obligation at filing instead of a clean reconciliation.
Why the other options are wrong
- B) ACA Section 1401 requires reconciliation on a federal income tax return; advance payments are estimates, not a final determination.
- C) Repayment is limited to the excess over the credit actually allowed, not the full amount of the advance payments.
- D) Reconciliation runs through the enrollee's federal tax return, not through the Marketplace settling up with the insurer.
Memory hook
Advance now, reconcile on the return.