Financial Help for Monthly Premiums
The healthcare premium tax credit, also known as the premium subsidy, is a financial assistance program that helps eligible individuals and families pay for health insurance premiums.
- Consumers with certain household incomes who aren’t eligible for other qualifying coverage, like through a job, Medicare, most Medicaid coverage, or CHIP, may be eligible for savings through the Marketplace.
- If your projected annual household income for the coverage year falls between 100 percent and 400 percent of the Federal Poverty Level (FPL), you may qualify for a premium tax credit (PTC).
- PTCs are only available to consumers who enroll in an individual market Marketplace plan through the Marketplace.
What is the Premium Tax Credit?
The premium tax credit is a subsidy that can help reduce the cost of health insurance for those who qualify based on their income and other factors. If you are eligible for the premium tax credit and have enrolled in a health insurance plan through the Health Insurance Marketplace, the credit is typically applied directly to your monthly insurance premium.
When you apply for coverage through the Marketplace, you will provide information about your income and household size. This information will be used to determine if you are eligible for the premium tax credit and to calculate the amount of your subsidy. The premium tax credit is designed to help cover a portion of your monthly premium costs, so you will typically be responsible for paying the remaining amount.
If you qualify for the premium tax credit, the amount of the credit will be paid directly to your insurance company on your behalf. This will reduce the amount you owe for your monthly premium, and you will be responsible for paying only the remaining portion.
The premium tax credit can vary depending on your income, the size of your household, and other factors. If your income or household size changes during the year, it’s important to report these changes to the Marketplace so that your premium tax credit can be adjusted accordingly. This will help ensure that you are receiving the correct amount of subsidy to help cover your monthly premium costs.
How to Qualify for Premium Tax Credits (PTC)
To qualify for federal healthcare premium subsidies, also known as the Premium Tax Credit, you must meet the following requirements:
Income: You must have a household income between 100% and 400% of the federal poverty level (FPL) for your family size. In 2021, the FPL for a family of four is $26,500. The income limits are adjusted each year.
Citizenship or Legal Status: You must be a U.S. citizen, U.S. national, or lawfully present immigrant. Undocumented immigrants are not eligible for premium subsidies.
Health Insurance Marketplace: You must enroll in a health insurance plan through the Health Insurance Marketplace. If you are eligible for employer-sponsored health insurance or a government-sponsored program such as Medicaid or Medicare, you may not be eligible for premium subsidies.
Tax Filing Status: You must file a tax return, even if your income is below the filing threshold. If you are married, you must file a joint tax return to qualify for premium subsidies.
No Access to Affordable Coverage: You cannot be eligible for affordable health insurance coverage through an employer or a government-sponsored program.
The Premium Tax Credit is based on your income, family size, and the cost of health insurance in your area. The amount of the subsidy can vary based on these factors. To determine your eligibility for premium subsidies, you can use the Marketplace application on Healthcare.gov or work with a licensed health insurance agent or broker.
Receiving Premium Subsidies in Advance
If you are eligible for the Premium Tax Credit and enroll in a health insurance plan through the Health Insurance Marketplace, you can choose to receive advance premium subsidies to help lower your monthly insurance premium. To receive advance subsidies, you will need to follow these steps:
Apply for coverage through the Health Insurance Marketplace: You can apply for health insurance through the Marketplace during the annual Open Enrollment period or during a Special Enrollment Period if you experience a qualifying life event, such as losing your job or getting married.
Estimate your income: When you apply for coverage through the Marketplace, you will need to provide an estimate of your income for the upcoming year. This estimate will be used to determine your eligibility for premium subsidies.
Choose a health insurance plan: You can compare health insurance plans available in your area and choose the plan that best fits your needs and budget.
Apply for premium subsidies: When you apply for coverage through the Marketplace, you will be asked if you want to apply for premium subsidies. If you are eligible, you can choose to receive advance subsidies to lower your monthly insurance premium.
Provide income verification: If you choose to receive advance subsidies, you will need to provide income verification to the Marketplace. This may include tax returns, pay stubs, or other documents that show your income.
Report changes in income: If your income changes during the year, you will need to report these changes to the Marketplace. Depending on the change, your subsidy amount may be adjusted.
Once you are approved for advance subsidies, the Marketplace will pay a portion of your health insurance premium directly to your insurance company each month. You will be responsible for paying the remaining portion of the premium. If you overestimate your income or experience a significant life change that affects your income, you may be required to repay some or all of the advance subsidies when you file your tax return for the year.
Do I Need to Pay Back the Premium Tax Credit I Received?
If you received advance premium tax credits (APTC) to help pay for your health insurance through the Health Insurance Marketplace, you may be required to pay back some or all of the APTC when you file your federal income tax return.
The amount of APTC you have to repay depends on your income and how much you received in APTC. If you earned more than you estimated when you applied for health insurance through the Marketplace, you may have to repay some or all of the APTC you received. On the other hand, if you earned less than you estimated, you may be eligible for additional APTC when you file your tax return.
The amount of APTC you have to repay is determined by a formula that takes into account your household income, the federal poverty level, and the cost of the benchmark health insurance plan in your area. The formula is designed to ensure that you only have to repay a portion of the APTC based on your income.
If you owe a repayment of APTC, it will be added to your federal income tax liability for the year, which means you may have to pay the amount back when you file your tax return. However, there are certain income limits and caps on the amount you have to repay, which means that you may not have to pay back the full amount of APTC you received.
It’s important to review your tax documents and talk to a tax professional if you have questions about how APTC repayment works or if you need help filing your tax return.
