Intuit Academy Tax Practice Exam

What is the status of the Premium Tax Credit in terms of refundability?

1. Non-refundable

2. Refundable

3. Only available to certain taxpayers

4. Applies to self-employed individuals only

The correct answer is: Refundable

The Premium Tax Credit is designed to help individuals and families afford health insurance coverage purchased through the Health Insurance Marketplace. One of its key features is that it is refundable, meaning that eligible taxpayers can receive the credit even if they do not owe enough in taxes to offset the full amount of the credit. This refundability ensures that low- and moderate-income individuals and families, who may not have substantial tax liabilities, can still benefit from the credit to lower their health insurance costs. This characteristic also helps to encourage participation in the health insurance market, providing financial assistance regardless of the taxpayer's overall tax liability. A refundable tax credit can also assist in providing a financial safety net by potentially increasing a taxpayer's refund or reducing the amount owed. Options indicating that the Premium Tax Credit is non-refundable or only available to certain taxpayers do not capture the widespread accessibility and financial support that this credit offers. Similarly, the notion that it only applies to self-employed individuals is incorrect, as it is available to a diverse group of taxpayers regardless of their employment status. Thus, the characterization of the Premium Tax Credit as a refundable credit accurately reflects its role in the broader context of supporting health insurance affordability.