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Small Business Employee Benefits and HR Blog

Health Insurance Tax Credits - Cheat Sheet

December 20, 2013
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The following FAQs and charts provides a quick reference on the individual health insurance tax credits including eligibility, amount of the tax credits, how to access the tax credits, and how employers can help.

Health Insurance Tax Credits -  What Are They?

As of 2014, the federal government is providing discounts for health insurance to eligible individuals and families. The discounts, called “health insurance tax credits”, help many employees buy more affordable individual or family health insurance coverage through the new state health insurance exchanges (“marketplaces”).  The health insurance tax credits are "advanced-payable" meaning they are applied when you purchase health insurance coverage.

Health Insurance Tax Credits -  Eligibility

Employees who meet certain income requirements and who do not have access to affordable health insurance through an employer or another government program are eligible for a discount. 

The tax credits are available to households with income up to 400% of the federal poverty line (FPL). This translates to up to $45,960 for an individual in 2013, or $94,200 for a family of four.

eligibility

Tip: Use these health insurance tax credit charts to look up a specific income.

Health Insurance Tax Credits - How Much are They?

The tax credits act as a cap on how much you pay for health insurance. The health insurance tax credit cap your health insurance cost at between 2% -9.5% of income, based on your income. See the examples below.

example_subsidies

Health Insurance Tax Credits - Where Do I Access Them?

The health insurance tax credits are only be available when you purchase individual or family health insurance through your state’s health insurance exchange. This can be done online or through a health insurance broker. Each state will have a website where you can view and compare policies, enroll in a plan, and receive the discount. Look up your state health insurance exchange (aka marketplace) here.

Health Insurance Tax Credits - How Can My Employer Help?

Your employer can provide you both a valued employee health benefit, and allow you to be eligible for the health insurance subsidies, by: 
  • Not offering a group health insurance plan (because offering affordable group health insurance disqualifies you from the subsidies).

  • Offering a "pure" defined contribution health plan. With a defined contribution health plan your employer gives you a healthcare allowance you can use on health insurance. You enroll in health insurance through your state’s marketplace, and receive a discount via a health insurance subsidy (if eligible). You receive tax-free reimbursement from your employer for your health insurance (up to the amount of your defined contribution allowance).

Do you have questions about the health insurance tax credits? Leave a comment below.

 

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