What is a health insurance tax credit?

A premium tax credit, also called a premium subsidy, lowers the cost of your health insurance. You can apply the discount to your insurance bill every month, or you can get the credit as a refund on your federal income taxes.

The credit is part of the Affordable Care Act (ACA), also called "Obamacare." It is designed to help eligible families or individuals with low to middle incomes pay for health insurance. Premium tax credits are only available if you enroll in a qualifying insurance plan through the federal marketplace or a state health exchange.

Health insurance tax credit amounts are set by the federal government, so they're the same nationwide.

How do I know if I qualify for a tax credit?

When you apply for coverage through a health insurance marketplace, also called an exchange, the system will determine your eligibility for tax credits based on your income and household size.

You qualify for premium tax credits if you make less than four times the federal poverty level. And if you earn more than four times the federal poverty level, you may still qualify for health insurance discounts if you spend more than 8.5% of your income on health insurance premiums.

Enhanced subsidies were extended through the end of 2025 as a part of a wide-reaching federal law called the Inflation Reduction Act.

You can preview your tax credit eligibility by using an Affordable Care Act subsidy calculator. If you qualify, then you'll get a quote for the second-cheapest Silver plan available.

The dollar value of your tax credit depends on two factors: the size of your family and your income. In other words, even if your income increases, you can remain eligible for a premium tax credit if your family also gets bigger.

For 2024 health plans, if you have a family of three, then your household can earn up to $99,440 and remain eligible. In comparison, your household income can only be $78,880 or less for a family size of two.

You may be eligible for Medicaid if you are an individual with income at or below $20,120.

What are the income limits for the health insurance subsidy?

The 2024 income limits for the health insurance subsidy are $58,320 for a single person and $120,000 for a family of four. That's four times the federal poverty level (FPL), and the most you can earn and still qualify for premium tax credits (unless you pay more than 8.5% of your income for health insurance).

If you earn more than the maximum amount, you may still qualify for subsidies based on how your income compares to your cost of health insurance. For example, if you have high monthly health insurance bills because of your age or where you live, those monthly costs could be capped at 8.5% of your income through discounts.

You can claim a premium tax credit even if you don't have your latest tax records on hand. The Centers for Medicare & Medicaid Services (CMS) give you up to 150 days to prove your income level.

Recent changes to premium tax credit eligibility requirements mean you can go without filing your taxes for up to two years and still qualify for health exchange subsidies. Keep in mind that if you miss this deadline, you won't be eligible for advance premium tax credits in the future.

How does the health insurance tax credit work?

You can get the health care tax credits in two ways...

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