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Introduction

The Taxpayer Advocate Service developed the Premium Tax Credit Change Estimator to help you estimate how your premium tax credit will change if your income or family size change during the year.

What is the Estimator?

When your life changes, the amount of your premium tax credit might change, too. Life changes can affect the amount of your premium tax credit but will not affect your advance payments of the credit, which is an estimation of your premium tax credit, unless you notify the Marketplace of the change.

For example, if your advance payments of the credit are based on an estimate that your income for the year will be $25,000 but you get a new job that will increase your income to $30,000 for the year, you should notify the Marketplace of the change. Otherwise, it is likely that your premium tax credit will be less than your advance credit payments, which will result in additional tax liability to you.

Remember, the Estimator only gives you an estimate and you will not know your actual premium tax credit until you file your tax return.

This estimator does not estimate premium tax credit changes when:

  • You move to a different ZIP code.
  • You marry or divorce.

What is the Credit?

The premium tax credit is a tax credit established by the Affordable Care Act. Starting in 2014, if you get your health insurance coverage through a state or the federal Health Insurance Marketplace you may be eligible for the premium tax credit. This credit can help make health insurance more affordable to you and your family. In general, you may be eligible for the credit if:

  • You enroll in a qualified health plan through the Marketplace for a member of your family (you, your spouse or your dependents),
  • For the same months your enrolled in Marketplace coverage, one or more of the enrolled family members is ineligible for other coverage - such as through an employer or government plan,
  • Your household income is at least 100% and no more than 400% of the federal poverty line for your family size,
  • If you are married, you file a joint return with your spouse. However, if you are a victim of domestic violence or spousal abandonment, you may be able to file as married filing separate, and
  • You cannot be claimed as a dependent by another person.

For more information about the requirements, visit the Premium Tax Credit page on IRS.gov. You can also read Publications 5120 and 5121, "Facts about the Premium Tax Credit."

How does the premium tax credit work?

You may elect to have advance payments of the credit paid directly to your insurance provider – this will help offset premium costs. You would then list the amount of the advance payments and reconcile it with the actual credit amount when you file your 2015 tax return in 2016. You can also choose not to have advance payments and receive the premium assistance provided by the credit all at once when you file your return.

In both cases, you will need to claim the credit on your tax return.

The credit is based on your:

  • Total annual household income,
  • Family size (you, your spouse, and dependents),
  • Filing status,
  • Address, and
  • The number and ages of the family members who are enrolled and are not eligible for other health coverage.

How does the Marketplace determine my credit?

If you choose to take advance payments of the credit, the Marketplace determines your eligibility for advance payments of the credit using projections of your income and number of personal exemptions (you, your spouse, and dependents) when you enroll in a qualified health plan.

If this information changes during the year and you don't notify the Marketplace, the amount of the advance payments of the credit may be substantially different from the amount of the premium tax credit you take on your tax return.

What types of changes can affect my credit?

Changes in circumstances that can affect the amount of your premium tax credit include:

  • Changes in your household income,
  • Birth or adoption,
  • Marriage or divorce,
  • Moving to a different address,
  • Gaining or losing eligibility for other health care coverage, and
  • Other changes affecting income and your family.

Information You Need to Use the Estimator

You need to provide:

  1. An estimate of your monthly income,
  2. Your family size (includes you, your spouse and your dependents),
  3. The age of each family member enrolled in Marketplace coverage and whether they are eligible for coverage outside of the Marketplace (for example: coverage through an employer, Medicare, or Medicaid),
  4. Your expected filing status,
  5. The state and county where you live,
  6. The cost of the benchmark plan used in calculating your advance credit payments if you live in a state that is not participating in the federal Marketplace at Healthcare.gov,
  7. The monthly premium for the health insurance in which you are enrolled, and
  8. The monthly advance premium credit payments for your coverage (if any).

Remember

This estimator only provides an estimate of the changes to the premium tax credit. It does not calculate the actual credit.

Start

KEY TERMS

Applicable Percent

The percent of your income that you are considered able to afford for your and your family's health insurance.

Household income %
of Federal poverty line
Initial % Final %
< 133% 2.0 2.0
133% - 150% 3.0 4.0
150% - 200% 4.0 6.3
200% - 250% 6.3 8.05
250% - 300% 8.05 9.5
300% - 400% 9.5 9.5

Benchmark Plan

The benchmark plan is the second lowest cost silver plan available in your area that covers the members of your family (you, your spouse and your dependents) who are enrolled in Marketplace coverage and not eligible for other health insurance coverage such as employer-sponsored or government-sponsored coverage.

The premium tax credit is the lesser of:

  • The premiums for the plan in which you and/or your family members enroll,

or

  • The premium for your benchmark plan minus your contribution amount.

Contribution Amount

The contribution amount is the amount you are considered to be able to afford to pay for health insurance. It would be the amount you pay if you enroll in your benchmark plan.

Determined by multiplying your annual household income by your applicable percent.

Family

Generally you (if no one can claim you as a dependent), your spouse (if married and both spouses are on the same return), and anyone else that you are able to claim as a dependent.

Federal Poverty Line

The poverty guidelines published by the Department of Health & Human Services.

HHS Federal Poverty Guidelines for 2015.

Eligibility for the premium tax credit for 2016 is based on the 2015 guidelines.

Health Insurance Marketplace

One of the state or the federal exchanges where you can shop for and purchase health insurance.

Health Insurance Premium

This is the total cost of the plan you choose on the Exchange before the premium tax credit is applied.

Household Income

Household income is your modified adjusted gross income (MAGI) and the MAGI of your spouse if you file a joint return, plus the MAGI of your dependents who are required to file a federal tax return.

Modified adjusted gross income is the adjusted gross income as reported on Form 1040 plus any:

  • Foreign earned income exclusion,
  • Nontaxable Social Security benefits (including tier 1 railroad retirement benefits), and
  • Tax-exempt interest.

It does not include Supplemental Security Income (SSI).

Silver Plan

Marketplace insurance plans are categorized by metal levels: bronze, silver, gold, and platinum. The metal level is based on how much the insurer pays for services covered under the plan.

A silver plan is a health insurance plan where the insurer pays on average 70% of the cost of covered services.

The premium tax credit is limited by comparing the cost of your coverage to that of the second lowest cost silver plan that covers you and your family.

If you are enrolled in more expensive coverage, you will pay the additional amount. However, if you are enrolled in coverage that costs less, your share of the premium will also be less.

For more information, go to healthcare.gov