Tax Credits
Advance Premium Tax Credits (APTCs) can be used to purchase health insurance.
Advance Premium Tax Credits (APTCs) were created by the Affordable Care Act.
The American Rescue Plan Act of 2021 greatly expanded Premium Tax Credits for 2 years. The Inflation Reduction Act (IRA) of 2022 extended this benefit until the end of 2025.
♦ Importantly - In 2025, APTC are still available to individuals and families earning more than 400%. After 2025, there maybe be a cutoff at 400%.
♦ It is a tax credit you can receive even if you don’t owe any federal income taxes. You can use it in advance to lower your monthly health insurance premium.
Most people have come to think of this as a subsidy.
♦ When you apply for coverage in the Health Insurance Marketplace, you estimate your expected income for the year. If you qualify for a premium tax credit based on your estimate, you can use any amount of the credit in advance to lower your premium.
Advance Premium Tax Credit
♦ You do NOT receive money directly. The credit (subsidy) is passed to the insurance company you choose.
♦ If at the end of the year you’ve taken more premium tax credit in advance than you’re due based on your final income, you’ll have to pay back the excess when you file your federal tax return.
♦ If you’ve taken less than you qualify for, you’ll get the difference back.
The amount of excess advance credit payments that you are required to repay may be limited based on your household income and filing status.
The repayment limits vary depending on where household income falls as a percentage of the Federal Poverty Guidelines, more commonly referred to as Federal Poverty Level or FPL for short.
| % of FPL | Single | Family |
| Less than 200% | $375 | $750 |
| 200% - 300% | $950 | $1,900 |
| 300% - 400% | $1,575 | $3,150 |
| 400% or more | the difference | |
→ Normally anyone earning over 400% of FPL would have to payback all their subsidy. The American Rescue Plan Act of 2021 and the Inflation Reduction Act (IRA) of 2022 changed this through 2025.
Over 400% you are now expected to pay 8.5% toward your insurance.
• If your earnings end up higher than you estimated then you will need to payback the difference between what your received and what you qualified for based on your higher income.
• If your estimate was too high you would qualify for some credit returned when you file taxes.
How this will play out in future years is not certain.
Who gets a credit?
Not everybody who is eligible to purchase coverage at the Marketplace will be eligible for a premium tax credit (subsidy). To qualify for a tax credit you will have to meet requirements having to do with you household income and other areas such as not having access to affordable coverage through employment.
♦ If you are not a U.S. citizen, a U.S. national, or an alien lawfully present in the U.S. you are not eligible to buy a plan on the health insurance Marketplace.
However, you can shop for health insurance outside of the Marketplace.
• Insurance companies cannot turn you down based on your health status or your immigration status.
Income
You will need to estimate what your household income is likely to be for the year.
♦ This an estimate, not what your income was the year before, although your estimate may be close.
• In general, if your estimate is 25% less or $6,000 less than the previous year tax record, you might receive a notice from the Marketplace asking about this. They call this a 'data match inconsistency notice.' Be truthful. If you are unemployed or working a lower paying job now just explain that.
What you enter here will be used to determine if you qualify for a premium tax credit. Later, this number will be compared to your income when you file taxes for the year that you receive premium tax credits.
What if I estimate too low?
A low estimate will generate a larger premium tax credit than you should have received.
♦ Most people choose to receive all their premium tax credit in advance so their monthly insurance premium will be as low as possible.
• When you file your federal tax return you will be asked to pay back any excess.
Medicaid
In some cases, you will not be eligible for premium tax credits. The Marketplace considers your household income and the state where you live when determining possible eligibility for Medicaid.
♦ Live in a state that expanded their Medicaid program and are eligible for Medicaid
— you will be transferred to your state's Medicaid agency.
♦ Live in state that DID NOT expand their Medicaid program
— qualifying for premium tax credits will be your only realistic option. In this case, income level will be critical.
• You can still apply to your state's Medicaid program but you will need to meet your state's requirements, which are usually more restrictive than the expanded Medicaid program.
Children's Health Insurance Program (CHIP)
If you have children they will be expected to first try to receive health insurance through your state's CHIP program.
♦ CHIP is a federal and state funded program that provides free to low cost health insurance to children based upon household income.
If the Marketplace has determined your children may qualify for CHIP their information will automatically be forwarded to your state's CHIP program.
♦ You will not be able to receive a premium tax credit for children if they qualify for CHIP.
If your children are refused CHIP health insurance then you need to inform the Marketplace and see if you can purchase insurance for your children through the Marketplace, at that time you may be able to receive additional premium tax credits.
Learn more ... CHIP.
Household Size
Count yourself, your spouse if you’re married, plus everyone you’ll claim as a tax dependent, including those who don’t need coverage.
If anyone in your household has coverage through an employer, a plan they bought themselves, a public program like Medicaid, CHIP, or Medicare, or another source, you still need to include them and their income on your application if you claim them as a tax dependent.
Not everyone's household is the same ...It can get very confusing especially when caring for an aging relative. Much more about this subject can be found in the article Household Size.
MAGI
The Marketplace uses an income number called Modified Adjusted Gross Income (MAGI) to determine eligibility for a premium tax credit and other savings.
For most people, this number will be close to their Adjusted Gross Income (AGI).
The MAGI takes the AGI and adds back some deductions. Many of these deductions are rare, so it's possible your AGI and MAGI can be identical. See the article Marketplace for more details.
♦ The majority of people applying at the Marketplace make their best effort to estimate their income based off their prior tax year. The Marketplace will also be comparing what you estimate with what your reported the last year.
You usually won't be questioned, unless there is a large discrepancy from a prior year (usually $6,000 or more). The Marketplace may ask for some documents to help support your estimate. Don’t get overly worried, this is quite rare.
Can I get a subsidy? — Your MAGI must be between 100 – 400 % of the Federal Poverty Level (FPL) to qualify for a premium tax credit (subsidy).
♦ Below 100% — you are expected to seek assistance through Medicaid.
Unfortunately, if the state you live in did not expand Medicaid you are not likely to be able to receive much assistant through Medicaid.
The American Rescue Plan Act changed everything for up to two years. The Inflation Reduction Act (IRA) of 2022 added 3 more years, through the end of 2025.
The Federal Poverty Level (FPL) requirement based on income has been temporarily put on hold. There is no limit on how much you can earn and still qualify for help paying for insurance.
At the same time the percentage you are expected to spend on health insurance was reduced from a range of 2 - 9.83% to a low as 0 - 8.5%. This results in an increased tax credit for most people.
♦ In prior years if your income was above 400% — you could purchase coverage at the Marketplace but you did not qualify for a premium tax credit because you have too much income.
The Department of Health and Human Services (HHS) releases Poverty Guidelines.
♦ Enrollment for 2024 coverage uses the 2023 FPL numbers.
The exception being Alaska and Hawaii where the FPL is higher.
Income Levels
Income needed to quality for a Subsidy for 2025 coverage year will be based upon 2024 FPL.
| # in Household | 100% FPL | 138% FPL | 300% FPL | 400% FPL |
|---|---|---|---|---|
| 1 | $15,060 | $20,782 | $45,180 | $60,240 |
| 2 | $20,440 | $28,207 | $61,320 | $81,760 |
| 3 | $25,820 | $35,631 | $77,460 | $103,280 |
| 4 | $31,200 | $43,056 | $93,600 | $124,800 |
Important Income Levels
Between 100% and 400% FPL
♦ In all states you qualify for premium tax credits that will lower your monthly premium for a Marketplace health insurance plan.
Over 400% FPL
♦ You would normally not receive any assistance. But the American Rescue Plan Act of 2021 and the Inflation Reduction Act (IRA) of 2022 changed this through the end of 2025.
Below 138% FPL
♦ If your state has expanded Medicaid coverage, you qualify for Medicaid based only on your income.
♦ If your state did not expand Medicaid you may still qualify for Medicaid but it will have to be under your state's current rules.
Should you find you cannot get Medicaid and your income is above 100% FPL then you should complete an application at the Marketplace handling your state. You would likely qualify for premium tax credits to help purchase insurance. Credits may only be used to purchase a Marketplace plan.
Below 100% FPL
♦ You will not be able to receive savings on a Marketplace health insurance plan. If your state hasn't expanded Medicaid coverage, you won't qualify for income-based Medicaid either.
You may still qualify for Medicaid under your state's current rules.
Calculator
How to use the calculator
The calculator at the bottom of this page is provided courtesy of the Kaiser Family Foundation. While it has proven to be very accurate, the results are best used as a rough guide.
Income tips
♦ If you live in a state that DID NOT expand Medicaid then you must have an income that is at least 100% of the federal poverty level or you cannot receive any help. So a family of two would need a total income of at least $19,720 to qualify for assistance in 2024.
• Income can include everything from salary, dividends, capital gains and one often over looked — self-employed income.
If you come up short on income consider self-employed income in your calculation to get over over the 100% threshold.
Be sure to keep a simple ledger of any self-employed income and to plan to report it when you file taxes the next year.
The calculator will show that the closer your income is to 100% of the FPL the higher the tax credit (subsidy) will be.
Usually a family of two with an income higher than 400% of FPL ($19,720 x 4 = $78,880) would not have been able to receive help.
♦ Because of to the American Rescue Plan Act they could actually receive assistance in 2024.
This help was scheduled to expire at the end of 2022. However, the Inflation Reduction Act (IRA) signed by President Biden on August 16,2022 extends help through the end of 2025.
They will not be expected to pay more than 8.5% of household income toward insurance premiums.
