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2021 federal poverty guidelines

Written by: Gabrielle Smith
March 17, 2021 at 9:57 AM

Each year an updated chart of federal poverty guidelines is released to help you understand if your household income qualifies you for several different types of federal aid. However, with the passing of the American Rescue Plan, these guidelines are being used a little differently moving forward.

In this article, we’ll cover what federal poverty guidelines are, how the IRS uses them, and why the American Rescue Plan has updated these guidelines.

What are federal poverty guidelines?

The federal poverty guidelines, also known as the federal poverty level (FPL), are used to measure a household’s poverty status depending on your income. But not just the income you take home—your FPL is based on your modified adjusted gross income.

Where you fall on the FPL will change every year because the guidelines are adjusted annually for inflation. The U.S. Department of Health and Human Services releases the federal poverty guidelines at the beginning of each year.

How does the IRS use the federal poverty guidelines?

The IRS uses the federal poverty guidelines to determine your eligibility for several programs, including Medicaid, premium tax credits, and others. Let’s go over each in a little more detail.

Medicaid

In order to qualify for Medicaid, your income must be no more than 138% of the FPL. Depending on where you live and how many people you have in your household, that number will look a little different for everyone.

For example, if you’re a single adult living in California, you need to make less than $17,774 a year to qualify for Medicaid. However, a family of four living in Hawaii will need to have an annual household income of less than $42,062 in order to qualify.

You can check the 2021 FPL guidelines chart below to see if you qualify for Medicaid based on your home state and household size.

Premium tax credits

Another important use of the FPL is determining whether health insurance purchased through the federal or state-run markets is affordable, and whether or not you’re eligible for premium tax credits.

Prior to the American Rescue Plan, an insurance policy was considered affordable if the annual cost was between 2% and 9% of your income, depending on where you fell on the FPL. You could receive a premium tax credit to lower your health insurance cost only if your income fell between 100% and 400% of the FPL.

Now, the American Rescue Plan mandates that all Americans will pay no more than 8.5% of their income for health insurance through 2022. This increased the number of Americans who are eligible for premium tax credits, as well as how much you can receive.

For example, people who earn between 100% and 150% of the FPL are now eligible for zero-premium coverage. Before, this group had to pay 2% or more of their income toward premiums.

Estimate your premium tax credits and health insurance costs here

Other programs

While determining eligibility for Medicaid and premium tax credits are the main two reasons the IRS will use federal poverty guidelines, there are a number of other programs that are available to low-income families that fall below a certain point on the FPL.

Here are just a few programs you may qualify for depending on your income:

2021 FPL guidelines

48 border states and D.C.

People in your household

2021 federal poverty level

Medicaid eligibility (138% of the FPL)

1

$12,880

$17,774

2

$17,420

$24,040

3

$21,960

$30,305

4

$26,500

$36,570

5

$31,040

$42,835

6

$35,580

$49,100

7

$40,120

$55,366

8

$44,660

$61,631

*Add $4,540 for each person in household over 8 persons

Alaska

People in your household

2021 federal poverty level

Medicaid eligibility (138% of FPL)

1

$16,090

$22,204

2

$21,770

$30,043

3

$27,450

$37,881

4

$33,130

$45,719

5

$38,810

$53,558

6

$44,490

$61,396

7

$50,170

$69,235

8

$55,850

$77,073

*Add $5,680 for each person in household over 8 persons

Hawaii

People in your household

2021 federal poverty level

Medicaid eligibility (138% of FPL)

1

$14,820

$20,452

2

$20,040

$27,655

3

$25,260

$34,859

4

$30,480

$42,062

5

$35,700

$49,266

6

$40,920

$56,470

7

$46,140

$63,673

8

$51,360

$70,877

*Add $5,220 for each person in household over 8 persons

Source: American Council on Aging and Health Sherpa

Are there other ways to save on health insurance?

While these adjustments to the federal poverty guidelines have made it easier to get premium tax credits and other discounts, health reimbursement arrangements (HRA) are another smart way to save on your health coverage.

Through an HRA, you can get the cost of your premium, as well as other qualifying medical expenses reimbursed 100% tax-free through your employer.

Take our quiz to find out which HRA is best for you and your organization

Conclusion

Understanding federal poverty guidelines and how the IRS uses them is an important step in getting more affordable health insurance, housing, education, and more. With the changes made possible by the American Rescue Plan, more Americans than ever before will have access to the care they deserve at a price they can afford.

Topics: Affordable Care Act, Premiums, Healthcare Reform, Medicaid, Employer Funded Health Insurance

Additional Resources

New to HRAs? Learn which is best for you in our comparison chart.
Want to get your healthcare costs reimbursed? See how in our webinar.

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