Health insurance marketplace premium tax credits by income

How it works

The credit caps the cost of the benchmark silver plan at a percent of household income, from this year's official ptc expected contribution percent low (not yet verified here; see the official source below) at the bottom of the range to this year's official ptc expected contribution percent high (not yet verified here; see the official source below) at the top, and the government pays the rest of the benchmark premium. The income range that qualifies starts at this year's official ptc income floor percent fpl (not yet verified here; see the official source below) percent of the poverty line, with an upper line that Congress has changed by law in recent years. Most people take the credit in advance, which lowers the monthly bill, and then reconcile on the tax return against actual income. Income that came in higher than estimated means some advance credit is repaid, subject to caps for lower incomes, and lower income means a larger refund. A person offered affordable coverage through a job generally cannot take it.

What it gives

The credit can cover most of the premium for a household with modest income.

It is refundable and can be paid in advance each month.

A self employed person can take it and still deduct the premiums paid out of pocket.

What it costs, or where the catch is

Income that comes in above the estimate means repaying advance credit at tax time.

A small income change near a line can change the credit by a large amount.

An offer of affordable coverage at work closes the door, even if the worker turned it down.

A worked example

Paz is self employed, single, and estimates $34,000 of income. Suppose the benchmark silver plan costs $600 a month and her expected share at that income is 5 percent, which is $1,700 a year or about $142 a month. The credit pays the other $458 a month, which is $600 minus $142. When her year finishes at $40,000, her expected share rises, and she repays about $300 of the advance credit on her return.

Where it goes wrong

The common miss is forgetting to report a raise or a new job to the marketplace during the year, which turns into a large repayment in April.

Who confirms it for you

For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

HealthCare.gov: How to save on your monthly insurance bill with a premium tax credit. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.