The Premium Tax Credit helps make health insurance more affordable for eligible individuals and families. It is part of the Affordable Care Act ACA (Obamacare). It is designed to help you pay for market health coverage. The Premium Tax Credit is calculated based on your household income and the cost of the benchmark plan in your area. It is a refundable credit, meaning that you don’t have to pay taxes on it if you don’t owe any. You can use a calculator to estimate the amount of credit you will receive based on your personal information. The calculator will also tell you if you are likely to qualify for the credit based on your income, household size, and other factors.
Changes in your income or household size during the year can affect your eligibility for the credit. You should report any changes in your income or household size as soon as possible to avoid having to repay an advance payment or excess credit at the end of the year. When you file your taxes, you must reconcile your APTC for the year to determine how much credit you actually received and how much you owe. This reconciliation process is not always straightforward, especially for low-income families that rely on their tax refunds to meet their needs.
Premium Tax Credit Income Limits
The Premium Tax Credit is available to individuals and families with incomes up to 400 percent of the federal poverty line. However, in most states, the lower limit of the credit is 138% of the poverty level because of Medicaid expansion (if you are eligible for Medicaid and do not have access to a Marketplace plan, you are not eligible for the premium tax credit). To be eligible for the Premium Tax Credit, you need to be enrolled in health insurance through the Marketplace. The Marketplace has an online tool that can help you estimate your eligibility for credit.
For 2021 and 2022, the American Rescue Plan (ARP) temporarily expanded eligibility for the premium tax credit by allowing people with incomes up to 400 percent of the poverty line to qualify for the tax credit without having to pay more than 8.5% of their household income toward the cost of the benchmark plan. But this rule was not in place for 2023 because the government capped the amount that can be claimed as a premium tax credit at 9.12% of household income.