[Updated for 2022-2023 qualifying income ranges and ARP expansion] To support millions of Americans struggling with the cost of health insurance an expanded premium tax credit has been made available to millions of Americans who purchase insurance via health insurance exchanges or marketplaces.
You have to purchase the insurance via these official exchanges or marketplaces to get the credit (which is applied by the provider who claims it from the government). Buying health insurance privately or getting it through your employer will disqualify you from getting this credit or subsidy.
This tax credit is officially called the Premium Tax Credit (PTC) and allows you offset the monthly premium costs of health care if your income is below certain thresholds. To get this credit, you must meet certain requirements and file a tax return.
The 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.
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.
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.
To be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent 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. To get an exact credit number you will have to submit a health insurance marketplace.
2022 PTC Eligibility. For tax years 2021 and 2022, the American Rescue Plan Act of 2021 (ARPA) temporarily expanded eligibility for the premium tax credit by eliminating the rule that a taxpayer with household income above 400% of the federal poverty line cannot qualify for a premium tax credit.IRS
The DHHS federal poverty guidelines are sometimes referred to as the “federal poverty line” or FPL. This is shown below for 2021 along with the PTC claimable via tax returns
|Household Income % of Federal Poverty Line||PTC claimable|
|Less than 150%||0%|
|150% to 199%||0%|
|200% to 249%||2%|
|250% to 299%||4%|
|300% to 399%||6%|
The above limits are for the latest tax year. They are indexed to inflation and adjusted annually and I will post updated figures when available. You can follow us 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
If at the end of the year you’ve taken more advance payments of the premium tax credit than you’re eligible for, you may have to pay money back when you file your federal income 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.