The Premium Tax Credit (PTC) allows you offset the monthly premium costs of health care plans purchased via official exchanges or government health insurance marketplaces.
For nearly 5 million households, the PTC completely offsets their monthly premium (free health insurance!). Another 10 million benefit with reduced health care premiums.
The PTC you receive is based on your thresholds related to your estimated household income (earnings) and size. The PTC is applied by the health care provider who claims it from the government.
To get this credit, you must also have filed a tax return. Further, buying health insurance privately or getting it through your employer will disqualify you from getting this credit or subsidy.
Expansion to Premium Tax Credit (PTC)
To support millions of Americans struggling with the cost of health insurance the premium tax credit was expanded (via ARPA and IRA bills) through 2025 for millions of Americans who purchase insurance via health insurance exchanges/marketplaces run by the federal or state government.
The expanded PTC can be used right away (via qualified insurance companies) to lower your monthly premium costs and you can choose how much advance credit payments to apply to your premiums each month, up to a maximum amount. They can be applied to bronze, silver, gold, and platinum plans
Your household size and income must fall within the falling thresholds to qualify for health care tax credit. If your income changes, or if you add or lose members of your household, your premium tax credit will likely change.
Note that the PTC offset is based on your income estimate for the year you want coverage, not last year. You can get an estimate of your PTC at the Healthcare.gov site or apply for a specific plan via a health insurance marketplace.
The amount of the PTC is equal to the total cost of the family’s benchmark plan (or plans) less the individual or family’s expected contribution for coverage (see tables below)
To be eligible for the premium tax credit, your estimated household income must be at least 100% (1x) of the DHHS federal poverty guidelines (FPL), but no more than 400% (4x) of the federal poverty line for your family size. So in general the lower your income within these ranges, the more of a credit you get.
For example in 2023 the 400% (4x) FPL is $54,360 for a single person and $111,000 for an average family of 4.
|Family size||2022-2023 FPL 100% Income Threshold|
|For a family of 2||$18,310|
|For a family of 3||$23,030|
|For a family of 4||$27,750|
|For a family of 5||$32,470|
|For a family of 6||$37,190|
|For a family of 7||$41,910|
|For a family of 8||$46,630|
|For a family of 9+||Add $4,720 for each extra person|
Based on the FPL, you can determine the amount of the PTC offset is claimable as summarized in the table
- If your income is above 400% of FPL, you may qualify for premium tax credits (after required contribution shown in table below) that lower your monthly premium for a 2022 Marketplace health insurance plan. Prior to the PTC expansion (until 2025) households with income above 400% of the FPL were not eligible for subsidized healthcare from a federal or state health exchange.
- If your income is between 100% and 400% of FPL, you will qualify for premium tax credits that lower your monthly premium for a Marketplace health insurance plan.
- If your income is below 100% of FPL, you probably will not qualify for savings on a Marketplace health insurance plan or for income-based Medicaid.
|Household Income % of Federal Poverty Line||2023 Expected Premium Contribution|
|Less than 150%||0%|
|150% to 199%||2%|
|200% to 249%||4%|
|250% to 299%||6%|
|300% to 399%||6% to 8.5%|
The above limits are for the latest tax year. They are indexed to inflation and adjusted annually and I will post updated figures as available. You can get updates via the options below.
Applying for the Premium Tax Credit
Because of the variables in figuring your qualification for this credit, your final PTC will be figured when you apply for coverage in the Marketplace.
Based upon that estimate, you can decide if you want to have all, some, or none of your estimated credit paid in advance directly to your insurance company to be applied to your monthly premiums
Reconciliation of PTC when filing tax return
If the amount of advance credit payments you get for the year is less than the tax credit you’re due, you’ll get the difference as a refundable credit when you file your federal income tax return. If your advance payments for the year are more than the amount of your credit, you must repay the excess advance payments with your tax return.
This is called “reconciling” the advance payments of the premium tax credit and the actual premium tax credit you qualify for based on your final annual income for the year.
You can also refer to the IRS site for more details on this credit and how to account for it in your tax return.