Premium Tax Credit Income Limits

A premium tax credit, or subsidy, is a federal assistance program that lowers the cost of health insurance for eligible individuals and families. It can be applied to monthly insurance costs or used as a refund on income taxes owed at the end of the year. To qualify, you must enroll in a marketplace plan and meet certain requirements. In addition, you must file Form 8962, Premium Tax Credit (PTC), with your federal income tax return. When it comes to the premium tax credit, income limits are important to consider. In previous years, household incomes had to be between 100% and 400% of the federal poverty line for family size to qualify. However, the American Rescue Plan of 2021 expanded eligibility for the premium tax credit by eliminating this limit.

How to Qualify For a Premium Tax Credit?

To qualify for a premium tax credit, you must have a valid Social Security number and must be a U.S. citizen or legal alien. In addition, you must have a qualifying income and must be without employer-sponsored health coverage or other affordable coverage. Your premium tax credit amount is based on your household size and income and the second-lowest-cost silver plan available in your marketplace. If you choose to take your premium tax credit in advance, the Treasury sends advance payments to your insurer on your behalf. These payments can reduce your health insurance premiums and lower your out-of-pocket costs.

How to Apply for a Premium Tax Credit?

Those who apply for the premium tax credit must submit a complete application on the health insurance marketplace and provide information about their income, family size, and filing status. They must also answer questions about whether they want to get advance payments of the credit and how much they expect their projected annual income to be. The marketplace will then determine if the individual or family is eligible for the credit and, if so, how much the credit should be.

People who receive advance payments of the premium tax credit must reconcile the amount they received with their federal income tax return at the end of the year. For most, this will require a little bit of extra work and may require the assistance of an accountant or someone who can help them fill out IRS Form 8962. If the advance payments are greater than what is claimed on the tax return, the taxpayer must repay the excess amount. However, for 2021 and 2022, the American Rescue Plan Act of 2021 temporarily suspended the requirement to repay the premium tax credit advance payments.