The premium tax credit is a refundable tax credit that helps lower the cost of health insurance. This can be especially helpful for people who aren’t eligible for subsidies on the marketplace. The amount of the premium tax credit varies depending on your income and family size, but if you qualify for it, it can bring down your monthly premiums or out-of-pocket costs significantly. In this guide, we’ll explain how to check if you qualify and what steps you need to take next:
In this guide, we find out What Is The Premium Tax Credit For Health Insurance, do i qualify for a tax credit for health insurance, what are the income limits for premium tax credit, and how does health insurance premium tax credit work.
Who Is Eligible For The Premium Tax Credit?
The premium tax credit is available to you if:
- You have a household income that’s between 100% and 400% of the federal poverty level. The actual percentage depends on your family size, and the table below shows what it would be for each scenario. For example, if your family size is two with an annual income of $62,040, then you’d fall into the second tier and thus receive a subsidy worth $5,616 (400% x [$24,280 – $21,780]).
- You’re legally present in the United States without being confined to detention or removal proceedings. (Note that this doesn’t apply if you have immigration status.)
How Do I Claim The Premium Tax Credit On My Tax Return?
You can claim the premium tax credit on your tax return. To do so, you’ll need to file Form 8962 with your 1040. In addition, you can claim the premium tax credit for yourself and your dependents.
What Does It Mean To Reconcile My Premium Tax Credit?
The Premium Tax Credit (PTC) is a refundable tax credit that can reduce your monthly premiums and out-of-pocket costs when you buy health insurance through the Marketplace.
The amount of PTC you’re eligible for varies based on your household income and size, but it helps make health coverage more affordable for millions of Americans.
When you apply for coverage through the Marketplace, we’ll determine whether or not you qualify for PTC based on:
- Your projected household income for the year—the difference between your estimated income and actual income will affect how much in PTC payments we expect to pay out
- Your projected premium tax credits if using advance payments—if using advance payments, these are known as reconciled payments
If you qualify for the premium tax credit, it can help lower your health insurance costs.
If you qualify for the premium tax credit, it can help lower your health insurance costs. The premium tax credit is a refundable tax credit that’s based on your income, family size and age.
- The tax credit is applied to the second lowest cost silver plan in your area
- You can apply the premium tax credit to any health insurance plan, not just marketplace plans
What Is The Premium Tax Credit For Health Insurance
For the majority of Marketplace policies, premium tax credits lower your premium. Your income and the cost of Marketplace health plans in your area will determine how much of a tax credit you may be eligible to receive.
The projected contribution you must make toward the premium for a mid-range (Silver) benchmark plan will be determined by the Marketplace. Depending on your salary in 2023, the anticipated payment will rise on a sliding basis. If your income falls between the poverty line and 150% of the poverty line, you would be expected to contribute nothing to the benchmark plan. And after your income exceeds 400% of the poverty line, you will be expected to contribute 8.5% of your income to the benchmark plan.
Your tax credit is equal to the difference between the benchmark plan’s premium and your anticipated contribution. (You are not required to pay more than the plan’s actual premium.) You can find out how much money it is on the Marketplace. Any Bronze, Silver, Gold, or Platinum plan provided in the Marketplace may be partially funded using that sum. It is not possible to use the credit to pay for a catastrophic plan.
You can apply for an advanced premium tax credit based on your anticipated income for the following year, or you can receive premium tax credits at the end of the current year. If you choose to get an advanced credit, the government will send your insurance provider 1/12 of the credit each month, and the remaining balance will be charged to your account.
It’s crucial to keep in mind that you may not be certain of your income for the coverage year when you apply for the premium tax credit during Open Enrollment, so you will apply based on your best estimate. The IRS will later compare your actual income to the amount of the premium tax credit you initially claimed when you file your tax return. You can be required to make up some or all of the difference if you overstated your income and claimed an excessive amount of the premium tax credit. You can claim the difference if you didn’t use the full amount of your premium tax credit throughout the year by filing a tax return. Any changes to your income throughout the year should be reported to the Marketplace so that your credit can be modified and you can avoid having to make hefty repayments at the end of the year.
do i qualify for a tax credit for health insurance
A premium tax credit can reduce your monthly health insurance cost. It’s only available for those who purchase insurance through a state or federal health insurance marketplace, and you must meet income and family size criteria to qualify. You’ll learn if you are eligible when you apply for a marketplace health insurance plan.
If you own a small business with fewer than 25 employees, you may also qualify for government subsidies, which can help pay for your employees’ health insurance.
What is a health insurance tax credit?
A premium tax credit, also called a premium subsidy, lowers the cost of your health insurance. The discount can be applied to your insurance bill every month, or you can receive the credit as a refund on your federal income taxes.
The credit, implemented under the Affordable Care Act (ACA), is designed to help eligible families or individuals with low to moderate incomes pay for health insurance. Premium tax credits are only available if you enroll in a qualifying insurance plan through the federal marketplace or a state marketplace.
A key exclusion is that those who sign up for Catastrophic coverage do not qualify for health insurance tax credits.
Health insurance tax credit amounts are set by the federal government, so they’re the same nationwide.
How do I know if I qualify for a tax credit?
When you apply for coverage through a health insurance marketplace, also called an exchange, the system will determine your eligibility for tax credits based on your income and household size.
If your income is below the federal poverty level (FPL) threshold, you may be eligible to enroll in Medicaid. Most states have now expanded Medicaid eligibility to incomes at or below 138% of the federal poverty level (FPL), providing more health insurance choices for those with low incomes.
Those with income between 100% and 400% of the federal poverty level qualify for premium tax credits. And if you earn more than 400% of the federal poverty level, you may still qualify for health insurance discounts.
The so-called “subsidy cliff” at 400% of the federal poverty level was eliminated in 2021 as a part of the American Rescue Plan Act. Those earning more than the 400% threshold gained access to subsidies that limited health insurance costs to 8.5% of their income.
This benefit was extended through the end of 2025 as a part of a wide-reaching federal law called the Inflation Reduction Act.
You can preview your tax credit eligibility by using our Affordable Care Act subsidy calculator. If you qualify, the monthly premium cap shows how much you would spend for the second-cheapest Silver plan on the marketplace.
The dollar amount you can receive depends on two factors: the size of your family and your income. As the number of family members you claim as dependents increases, your income can also increase while you still remain eligible for the credit. For 2023 health plans, if you have a family of three, then your household can earn up to $92,120 and remain eligible. In comparison, your household income can only be $73,240 or less for a family size of two.
What are the income limits for the health insurance subsidy?
Each year, the Department of Health and Human Services (HHS) determines the income guidelines. Below are the ranges of eligible income based on household size. It is important to note that you would use the prior year’s federal poverty level to determine eligibility and apply for the current year’s health care tax credits. When you file for the 2023 tax year, you would compare your household income against the 2022 FPL figures shown below.
If you earn more than these maximum amounts, you may still qualify for subsidies based on how your income compares to the cost of health insurance. For example, someone who has high health insurance rates because of their age or location could see those monthly costs reduced to 8.5% of their income through discounts.
How does the health insurance tax credit work?
You can get the health care tax credits in two ways:
The two methods would qualify you for the same number of credits, but they differ in eligibility requirements and when you receive the subsidy. Here’s how advance premium tax credits can reduce your monthly bills.
You can apply for the advance premium tax credit (APTC) when you apply for health insurance through the marketplace. With this program, the government sends advance payments directly to the health insurance company every month. The insurer then credits that money toward the cost of your health insurance premiums, decreasing your out-of-pocket costs each month.
On the other hand, if you are not eligible for advance premium payments, then a tax refund is available. When filing your taxes, you would subtract the full amount of the tax credit from all the taxes you owe. But during the plan year, you would pay more per month for health insurance since you would be responsible for your share of the premium along with the amount that would have been covered by the tax credits.
Therefore, if you expect to have low disposable income, taking the advance premium tax credit could be more beneficial if you qualify.
Anyone who receives a health insurance tax credit must file Form 8962 (Premium Tax Credit) with their tax return. To complete Form 8962, you’ll use the information from Form 1095-A (Health Insurance Marketplace Statement), which is a statement sent to you about how much your health insurance policy cost and the subsidies you received. Your final health insurance tax credits are based on the qualifying income reported on your Form 1040 individual tax return.
What happens if my family size or income changes during the year?
Life-changing events can impact your tax credit eligibility by either increasing or decreasing the amount that you are allowed to claim. Events that can affect your premium tax credits may include:
Since the marketplace determines your tax credit, it is important to report changes immediately so your health plan eligibility can be updated. And if you’re currently using the advance premium tax credit, then it is particularly important to report any life changes to the marketplace as soon as possible.
If you wait to report such changes, there may be discrepancies between what you paid and what you should pay. In this case, if you used more advance premium tax credits than you are allowed, you may have to pay back money when filing your federal income tax return. On the other hand, if you used less than allowed, you may get an added refund. This is known as “reconciling” your advance premium tax credits.
Health coverage tax credit (HCTC) vs. premium tax credit (PTC)
Health coverage tax credits (HCTCs) expired on Dec. 31, 2021. HCTCs lowered health insurance costs for eligible recipients, paying 72.5% of qualified health insurance premiums.
Premium tax credits (PTCs) are tax credits that recipients can use to lower their monthly health insurance premium when they enroll through the Health Insurance Marketplace. Those with income between 100% and 400% of the FPL qualify for PTCs, and those earning more than 400% may still qualify.
What is the small business health care tax credit?
Usually, small business owners are not required to offer health insurance if they have fewer than 50 full-time employees. Therefore, the small business health care tax credit, which was created under the ACA, encouraged small business owners to offer health insurance to their employees.
If a small business or tax-exempt firm (for example, a charity) meets a number of qualifications, it is eligible to receive the federal tax credit for two consecutive taxable years.
You and your business would be eligible for the credit if you fulfill all of the following requirements:
If you qualify, the federal government gives you a subsidy to help pay for your portion of employee premiums. The size of your workforce determines the amount of credit you can receive. For example, if your business has fewer than 10 full-time employees, you can receive the maximum credit possible. A larger business with 24 employees would qualify for a lower tax credit.
what are the income limits for premium tax credit
A premium tax credit can reduce your monthly health insurance cost. It’s only available for those who purchase insurance through a state or federal health insurance marketplace, and you must meet income and family size criteria to qualify. You’ll learn if you are eligible when you apply for a marketplace health insurance plan.
If you own a small business with fewer than 25 employees, you may also qualify for government subsidies, which can help pay for your employees’ health insurance.
What is a health insurance tax credit?
A premium tax credit, also called a premium subsidy, lowers the cost of your health insurance. The discount can be applied to your insurance bill every month, or you can receive the credit as a refund on your federal income taxes.
The credit, implemented under the Affordable Care Act (ACA), is designed to help eligible families or individuals with low to moderate incomes pay for health insurance. Premium tax credits are only available if you enroll in a qualifying insurance plan through the federal marketplace or a state marketplace.
A key exclusion is that those who sign up for Catastrophic coverage do not qualify for health insurance tax credits.
Health insurance tax credit amounts are set by the federal government, so they’re the same nationwide.
How do I know if I qualify for a tax credit?
When you apply for coverage through a health insurance marketplace, also called an exchange, the system will determine your eligibility for tax credits based on your income and household size.
If your income is below the federal poverty level (FPL) threshold, you may be eligible to enroll in Medicaid. Most states have now expanded Medicaid eligibility to incomes at or below 138% of the federal poverty level (FPL), providing more health insurance choices for those with low incomes.
Those with income between 100% and 400% of the federal poverty level qualify for premium tax credits. And if you earn more than 400% of the federal poverty level, you may still qualify for health insurance discounts.
The so-called “subsidy cliff” at 400% of the federal poverty level was eliminated in 2021 as a part of the American Rescue Plan Act. Those earning more than the 400% threshold gained access to subsidies that limited health insurance costs to 8.5% of their income.
This benefit was extended through the end of 2025 as a part of a wide-reaching federal law called the Inflation Reduction Act.
You can preview your tax credit eligibility by using our Affordable Care Act subsidy calculator. If you qualify, the monthly premium cap shows how much you would spend for the second-cheapest Silver plan on the marketplace.
The dollar amount you can receive depends on two factors: the size of your family and your income. As the number of family members you claim as dependents increases, your income can also increase while you still remain eligible for the credit. For 2023 health plans, if you have a family of three, then your household can earn up to $92,120 and remain eligible. In comparison, your household income can only be $73,240 or less for a family size of two.
What are the income limits for the health insurance subsidy?
Each year, the Department of Health and Human Services (HHS) determines the income guidelines. Below are the ranges of eligible income based on household size. It is important to note that you would use the prior year’s federal poverty level to determine eligibility and apply for the current year’s health care tax credits. When you file for the 2023 tax year, you would compare your household income against the 2022 FPL figures shown below.
If you earn more than these maximum amounts, you may still qualify for subsidies based on how your income compares to the cost of health insurance. For example, someone who has high health insurance rates because of their age or location could see those monthly costs reduced to 8.5% of their income through discounts.
How does the health insurance tax credit work?
You can get the health care tax credits in two ways:
The two methods would qualify you for the same number of credits, but they differ in eligibility requirements and when you receive the subsidy. Here’s how advance premium tax credits can reduce your monthly bills.
You can apply for the advance premium tax credit (APTC) when you apply for health insurance through the marketplace. With this program, the government sends advance payments directly to the health insurance company every month. The insurer then credits that money toward the cost of your health insurance premiums, decreasing your out-of-pocket costs each month.
On the other hand, if you are not eligible for advance premium payments, then a tax refund is available. When filing your taxes, you would subtract the full amount of the tax credit from all the taxes you owe. But during the plan year, you would pay more per month for health insurance since you would be responsible for your share of the premium along with the amount that would have been covered by the tax credits.
Therefore, if you expect to have low disposable income, taking the advance premium tax credit could be more beneficial if you qualify.
Anyone who receives a health insurance tax credit must file Form 8962 (Premium Tax Credit) with their tax return. To complete Form 8962, you’ll use the information from Form 1095-A (Health Insurance Marketplace Statement), which is a statement sent to you about how much your health insurance policy cost and the subsidies you received. Your final health insurance tax credits are based on the qualifying income reported on your Form 1040 individual tax return.
What happens if my family size or income changes during the year?
Life-changing events can impact your tax credit eligibility by either increasing or decreasing the amount that you are allowed to claim. Events that can affect your premium tax credits may include:
Since the marketplace determines your tax credit, it is important to report changes immediately so your health plan eligibility can be updated. And if you’re currently using the advance premium tax credit, then it is particularly important to report any life changes to the marketplace as soon as possible.
If you wait to report such changes, there may be discrepancies between what you paid and what you should pay. In this case, if you used more advance premium tax credits than you are allowed, you may have to pay back money when filing your federal income tax return. On the other hand, if you used less than allowed, you may get an added refund. This is known as “reconciling” your advance premium tax credits.
Health coverage tax credit (HCTC) vs. premium tax credit (PTC)
Health coverage tax credits (HCTCs) expired on Dec. 31, 2021. HCTCs lowered health insurance costs for eligible recipients, paying 72.5% of qualified health insurance premiums.
Premium tax credits (PTCs) are tax credits that recipients can use to lower their monthly health insurance premium when they enroll through the Health Insurance Marketplace. Those with income between 100% and 400% of the FPL qualify for PTCs, and those earning more than 400% may still qualify.
What is the small business health care tax credit?
Usually, small business owners are not required to offer health insurance if they have fewer than 50 full-time employees. Therefore, the small business health care tax credit, which was created under the ACA, encouraged small business owners to offer health insurance to their employees.
If a small business or tax-exempt firm (for example, a charity) meets a number of qualifications, it is eligible to receive the federal tax credit for two consecutive taxable years.
You and your business would be eligible for the credit if you fulfill all of the following requirements:
If you qualify, the federal government gives you a subsidy to help pay for your portion of employee premiums. The size of your workforce determines the amount of credit you can receive. For example, if your business has fewer than 10 full-time employees, you can receive the maximum credit possible. A larger business with 24 employees would qualify for a lower tax credit.
how does health insurance premium tax credit work
Premium tax credits reduce your premium for most Marketplace policies. The amount of the tax credit you may receive depends on your income and the cost of Marketplace health plans in your area.
The Marketplace will determine the expected contribution you are required to pay toward the premium for a mid-range (Silver) benchmark plan. The expected contribution will increase on a sliding scale based on your 2023 income. If your income is between the poverty level and 150% of the poverty level, the expected contribution you would be required to pay toward the benchmark plan is $0. And, once your income reaches 400% of the poverty level, the expected contribution you would be required to pay toward the benchmark plan is 8.5% of your income.
The difference between the premium for the benchmark plan and your expected contribution equals the amount of your tax credit. (You do not have to pay more than the actual premium for the plan.) The Marketplace will tell you what that dollar amount is. You can use that amount to help pay the premium for any Bronze, Silver, Gold, or Platinum plan offered in the Marketplace. The credit cannot be used to pay for a Catastrophic plan.
Premium tax credits may be claimed at the end of the year, or you can apply for an advanced premium tax credit based on your estimated income for the up-coming year. If you elect to receive an advanced credit, the government will pay 1/12 of the credit directly to your insurance company each month and the insurer will bill you for the rest of the premium.
It’s important to keep in mind that when you apply for the premium tax credit during Open Enrollment, you may not know for sure what your income for the coverage year will be, so you will apply based on your best estimate. Later, when you file your tax return, the IRS will compare your actual income to the amount of premium tax credit you claimed in advance. If you underestimated your income and claimed too much premium tax credit, you might have to pay back some or all of the difference. If you didn’t receive all of the premium tax credit you’re entitled to during the year, you can claim the difference when you file your tax return. You should report any changes in your income during the year to the Marketplace, so your credit can be adjusted and you can avoid any significant repayments at the end of the year.