Premium Tax Credit
Offset the Cost of Your Health Insurance Premiums
Families and individuals who get their health insurance through the Health Insurance Marketplace may be able to offset the cost of their monthly premiums with the Premium Tax Credit.
The premium tax credit (PTC) is a refundable credit that helps eligible people afford health insurance purchased through the Health Insurance Marketplace. This is a special credit designed for taxpayers with moderate incomes who do not qualify for coverage through an employer or government plan.
There are two options for receiving the premium tax credit:
• You can choose to have (all or part of) the credit paid in advance to your insurance company to lower what you pay for your monthly premiums; or
• You can receive the full benefit of the premium assistance when you file your income tax return.
Who Is Eligible for the Premium Tax Credit?
To qualify for the premium tax credit, families and individuals must meet certain criteria. The tax credit is available to moderate-income tax filers whose annual household income is between 100% and 400% of the Federal poverty line for their family size.
For 2015 (for residents of the 48 contiguous states and Washington, D.C.), the following shows when household income would be between 100% and 400% of the Federal poverty line. If your income falls within these ranges, you will generally qualify for the premium tax credit:
• $11,670 (100%) up to $46,680 (400%) for a family of 1
• $15,730 (100%) up to $62,920 (400%) for a family of 2
• $19,790 (100%) up to $79,160 (400%) for a family of 3
• $23,850 (100%) up to $95,400 (400%) for a family of 4
• $27,910 (100%) up to $111,640 (400%) for a family of 5
• $31,970 (100%) up to $127,880 (400%) for a family of 6
• $36,030 (100%) up to $144,120 (400%) for a family of 7
• $40,090 (100%) up to $160,360 (400%) for a family of 8
In addition to the income qualification, tax return filers must also meet other requirements, including the following:
Insurance Must Be Purchased Through the Marketplace. For premiums to be eligible for this tax credit, the health insurance coverage must be obtained through the Health Insurance Marketplace.
No Affordable Employer Health Plan Options. To claim the premium tax credit, you must be unable to get affordable coverage through an eligible employer-sponsored health plan. The term “affordable” refers to premiums that are less than 9.5% of the household income (which will be raised to 9.56% for plans starting in 2015).
Employer-Sponsored Plan Does Not Offer Minimum Value. If your employer plan covers less than 60% of expected costs, you can choose to purchase your insurance through the Health Insurance Marketplace and you may qualify for the premium tax credit.
Not Eligible for Government Programs. If you are eligible for coverage through a government plan (such as Medicare, Medicaid, CHIP, or TRICARE), you cannot use the premium tax credit.
Filing Status Cannot Be Married Filing Separately. If your filing status is “married filing separately,” you cannot claim the premium tax credit (except in certain cases of domestic abuse or spousal abandonment). Additionally, to qualify for this credit you cannot be claimed as a dependent by another person.
How to Use the Premium Tax Credit
If you qualify the premium tax credit, you can choose to use it in one of two ways: Get It Now or Get It Later. These options allow you to either reduce your monthly insurance premiums or apply the credit towards your tax return.
“Get It Now” means you can apply some or all of the tax credit towards your monthly insurance premiums for the next year. The credit is paid directly to the insurance company and applied to your premiums.
“Get It Later” means you can apply this credit to your income tax return at the end of the year. This is a refundable tax credit, which means it can lower your tax bill to below zero, possibly resulting in a tax refund.
Anyone who purchases their health insurance plan through the Health Insurance Marketplace is given the opportunity to determine their eligibility for the premium tax credit. If you qualify, you can then choose whether to have the credit paid in advance to your insurance company or to receive the full benefit when you file your tax return.
For more information, please see the following IRS Publications:
Facts About the Premium Tax Credit
• Publication 5120 (Your Credit, Your Choice – Get It Now or Get It Later): PDF
• Publication 5121 (Need Help Paying for Health Insurance Premiums?): PDF
• Publication 5152 (Report Changes to the Marketplace as They Happen): PDF