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:

Option 1: You can choose to get advance payments of the premium tax credit (or APTC). This means that the Health Insurance Marketplace will compute an estimated credit that is paid in advance to your insurance company to lower the amount you pay for your monthly premiums.

Option 2: You can choose to get all the benefit as a tax credit when you file your income tax return. Since it’s a refundable credit, the PTC will reduce the amount of tax you owe – and if the amount of the credit is more than your tax liability, you will get the remainder as a tax refund.

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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 taxpayers whose annual household income is between 100% and 400% of the federal poverty line for that family size.

The following data shows the 2019 federal poverty line for residents of the 48 contiguous states and Washington, DC:

• $12,140 for a family of 1
• $16,460 for a family of 2
• $20,780 for a family of 3
• $25,100 for a family of 4
• $29,420 for a family of 5
• $33,740 for a family of 6
• $38,060 for a family of 7
• $42,380 for a family of 8

The following data shows the 2019 federal poverty line for residents of Alaska:

• $15,180 for a family of 1
• $20,580 for a family of 2
• $25,980 for a family of 3
• $31,380 for a family of 4
• $36,780 for a family of 5
• $42,180 for a family of 6
• $47,580 for a family of 7
• $52,980 for a family of 8

The following data shows the 2019 federal poverty line for residents of Hawaii:

• $13,960 for a family of 1
• $18,930 for a family of 2
• $23,900 for a family of 3
• $28,870 for a family of 4
• $33,840 for a family of 5
• $38,810 for a family of 6
• $43,780 for a family of 7
• $48,750 for a family of 8

To see if you qualify for the premium tax credit, take the federal poverty line amount (for your family size) and multiply it by 4.0 – this gives you 400% of the federal poverty line. If your annual household income is less than 400% of the poverty line, then you are eligible for the PTC.

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. For plan years beginning in 2019, the term “affordable” refers to premiums that are less than 9.86% of the household income. (This amount is adjusted annually and will increase to 9.78% for plan years beginning in 2020.)

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 on their tax return.

RELATED: Tax Tips for the Affordable Care Act (ACA)

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 the tax credit towards your monthly insurance premiums. The credit is paid directly to the insurance company by the Health Insurance Marketplace and applied to your premiums. This option is also referred to as “advance payments of the premium tax credit” or APTC.

“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 5152 (Report Changes to the Marketplace as They Happen): PDF
• Publication 5187 (Affordable Care Act: What You and Your Family Need to Know): PDF

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