How the Premium Tax Credit is calculated
To figure out your PTC:
-
Calculate your modified adjusted gross income (MAGI), which is your adjusted gross income (AGI) in addition to certain tax-exempt income and other specific add-backs.
MAGI = AGI + tax-exempt interest + excluded foreign income + untaxed portion of Social Security benefits
For the PTC, your household income is your MAGI plus the MAGI of any dependents who are required to file a tax return.
-
Determine your Expected Household Contribution based on your income compared to the federal poverty line (FPL).
-
Find the premium for the Second-Lowest Cost Silver Plan (SLCSP) on the Marketplace.
Once you have these numbers, you can calculate the amount of your Premium Tax Credit:
Premium Tax Credit = Monthly Premium for the SLCSP − Expected Household Contribution
For example, if the SLCSP cost is $400 and your expected contribution is $100, your Premium Tax Credit would be:
$400 − $100 = $300 per month Premium Tax Credit
How do you receive the Premium Tax Credit?
There are two different ways you can receive the PTC:
- Advance Premium Tax Credit (APTC): If you choose to receive the APTC, a portion of the PTC (based on your estimated household income and family size) will be applied to your monthly premiums. These are considered advance payments of the credit.
- End-of-year credit: If you wait to claim the credit until the end of the year, you can claim the full amount when you file your tax return.
How the APTC works
If the advance payments you receive exceed your allowable credit because your income is higher than expected, you may have to repay the difference. However, you generally don’t need to repay the Premium Tax Credit if you accurately estimated your income.
Estimating your income as accurately as possible — and reporting income or family-size changes to the Marketplace during the year — reduces the chance of owing money at filing.
Each year, you must reconcile any advance Premium Tax Credit payments when you file your federal tax return. Use the information on Form 1095-A to complete IRS Form 8962 and compare the advance payments you received with the credit you were actually eligible for based on your annual income.
Who is eligible for the Premium Tax Credit?
You have to meet IRS requirements to be eligible for the Premium Tax Credit. You may be eligible for the PTC if:
- You or a member of your tax family (yourself, your spouse if filing jointly, and dependents you claimed) enrolled in health insurance through the Health Insurance Marketplace for at least one month of a calendar year.
- Your total household income is within the federal limits for Premium Tax Credit eligibility (typically between 100% and 400% of the FPL, depending on Medicaid eligibility in your state).
- You aren’t eligible for other Minimum Essential Coverage (MEC), including Medicare, Medicaid, or TRICARE. Note that eligibility for job-based (employer) coverage only disqualifies you if that plan is both affordable and provides minimum value.
- You generally don’t file your tax return as Married Filing Separately (subject to certain exceptions).
How much you receive for the PTC is influenced by several factors, including your household income, the cost of coverage, your location, and your family size.
