As part of the Affordable Care Act (ACA), premium tax credits are available to help individuals and families purchase individual health insurance through the Health Insurance Marketplaces. You are eligible for a premium tax credit if you meet certain income requirements and do not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare. The health insurance premium tax credits are "advanced-payable" meaning they can be applied toward your premium when you purchase health insurance coverage. The following premium tax credit charts show eligibility and the amount of the tax credits, updated for 2016.
Eligibility for the Premium Tax Credit
If your business doesn’t currently offer a group health insurance program, then your employees may be eligible for premium tax credits when purchasing individual health insurance policies on their state Exchange. To be eligible, they must meet the following requirements:
- Purchase coverage through the state or federal Exchange
- Household annual income falls within 100-400% of the federal poverty line for the size of the family
- Do not receive coverage through a federal program
- Do not file married filing separately on tax forms
- Can’t be claimed as dependent by another tax filer
The federal poverty line (FPL) is adjusted for the number of individuals in the household and each year for inflation. The FPL is set by the Health & Human Services.
Employees that purchase a health insurance plan through their employer are not eligible for the premium tax credit afforded under the Affordable Care Act. This credit is reserved for those who are unable to purchase affordable insurance through their employer, but do purchase individual insurance through their Health Insurance Marketplace.
The IRS uses a scale to determine exactly how much each individual will get back on a premium tax credit. Typically, the lower the household income, the higher the premium tax credit will be. The more money you make, the less your premium tax credits are.
Premium Tax Credit Chart - Examples
The following chart provides examples of how premium tax credits can affect the price of an individual health insurance policy.
While insurance caps and credit amounts may slightly vary from year to year, Americans know just what to expect with the help of an online calculator located on the HealthCare.gov site.
These tax premiums often offset the cost of health insurance for a number of Americans, and are a great resource for increasing the affordability of personal health insurance.
How does the Affordable Care Act affect your family? What other questions do you have about premium tax credits?