Health insurance can be inaccessible for many Americans due to its price. Strategies have been introduced to lower costs for those who are unable to afford high healthcare premiums, one of which is a premium tax credit.
Premium tax credits (PTCs) are a type of sliding scale subsidy that reduces the amount you pay monthly for individual or family health plans purchased through the Marketplace. The American Rescue Plan Act of 2021 was signed by President Biden on March 11, 2021, and allowed, for the first time, individuals with annual income 400% above the Federal Poverty Level (FPL) to be eligible for a PTC. States such as California, Massachusetts, New Jersey, and Vermont have enacted state-level subsidies that help out specific populations, too. Currently, the expansion will last until 2025. To be eligible, you must be enrolled through a Marketplace plan, have U.S. citizenship or legal residency, file federal income tax returns, and must not qualify for other programs such as Medicaid and Medicare. Additionally, you must not be eligible for an employee plan that offers minimum essential coverage.
There are two ways you can claim this credit:
- Claim a monthly Advanced Premium Tax Credit (APTC) by estimating income for the coming year. If you over- or underestimate, your premium credit is reconciled when you file taxes for this year.
- Premium tax credits may also be reconciled as a lump sum when you file taxes.
What’s considered a household?
For the Marketplace, a household consists of the tax filer, their spouse if they have one, and their tax dependents if they have any.
When determining who to include in your household, follow these guidelines:
- If you’re legally married, include your spouse.
- If you plan to claim someone as a tax dependent for the year you want coverage, do include them on your application.
- If you won’t claim them as a tax dependent, don’t include them.
- Include your spouse and tax dependents even if they don’t need health coverage.
Visit this link to see the limited exceptions to these basic rules
Summary
Premium tax credits can be an excellent solution for affordable healthcare coverage, but there are very specific requirements you must meet to claim this credit. The information in this blog, and completing a HealthPlanning Analysis with Caribou, can make it easier to determine if you qualify for a PTC and whether or not claiming a PTC is a good choice.
Learn More:
Income & Household Size | Healthcare.gov
Explaining Health Care Reform: Questions About Health Insurance Subsidies | KFF
Health Insurance Premium Tax Credit and Cost-Sharing Reductions | Congressional Research Service
Congress extends expanded eligibility for Health Insurance Premium Tax Credit until 2025 | Wolters Kluwer
Last Revised October 7th, 2024