This year over 7.1 million Americans enrolled in health plans on state and federal health insurance exchanges created by the Affordable Care Act (ACA). For many families, one of the benefits of enrolling in an exchange health plan is the “Premium Tax Credit,” also known as a premium subsidy. The subsidy is provided to help make the cost of healthcare insurance affordable to individuals and families who meet certain eligibility requirements:
- You must purchase insurance through a health insurance exchange (e.g., the Marketplace);
- Your household income must be between 100% and 400% of the federal poverty level (“FPL”).
- You must not be eligible for “affordable” employer-sponsored coverage, or government-sponsored coverage (like Medicare, Medicaid, CHIP, or TRICARE);
- You cannot be claimed by another person as a dependent; and
- You cannot file a “married filing separately” tax return (except in certain domestic violence situations—see IRS Notice 2014-23).
Your eligibility for the credit, and the amount of the credit you can receive, is determined based on the information you provide when you apply for coverage. If you are eligible, you decide when to receive the credit:
- Take it now – You can choose to have part or all of your estimated credit paid directly to your insurance company, thus lowering your share of monthly premiums during 2014.
- Take it later –You can wait until you file your 2014 income tax return (in 2015) to take the credit, which will be a refundable credit on your income tax return.