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Real Life Examples

These examples show how changes in a family's size and income will affect the amount of premium tax credit, but not the advance credit payment amounts.

Example One

The information for the family is as follows:

  • Tax year: 2019
  • $4,500 monthly income
  • 4 household members: Parents age 30 and 32 and two children under 14
  • They plan to file jointly
  • They live in Weber County, Utah
  • Their monthly insurance premium, before any tax credit, is $1,074
  • Elected advance credit payments of $932 per month

No Changes: Assuming there are no changes to their income, premiums, or family size:

  • Premium tax credit for 2019: $12,288
  • Advance credit payments for 2019: $11,184
  • Additional premium tax credit: $1,704
  • The family's estimated annual income: $54,000
  • Percentage of the federal poverty line: 215%
  • Total premiums for the year: $12,888

Changes: If the family does experience life changes, such as the birth of a new child in September - increasing their premiums to $1,245 for September through December:

  • Premium tax credit increases to: $13,572
  • If their advance credit payments remain the same: $11,184
  • The additional premium tax credit will be: $2,388

Example Two

The information for the family is as follows:

  • Tax year: 2019
  • $5,700 monthly income
  • 3 household members: 48 year old with two adult children aged 20 and 22 attending college.
  • Plan to file unmarried head of household
  • They live in Massachusetts
  • Their benchmark insurance premium is $1,470 per month
  • Their monthly premium, before any tax credit, is $1,446
  • Elected advance credit payments of $800 per month

No changes: Assuming there are no changes to their income, premiums, or family size:

  • Premium tax credit for 2019: $10,896
  • Advance credit payments for 2019: $9,600
  • Additional premium tax credit: $1,296
  • The family's estimated annual income: $68,400
  • Percentage of the federal poverty line: 329%
  • Total premiums for the year: $17,352

With Changes: If the monthly income increases to $6,000 per month beginning in May:

  • The premium tax credit reduces to $10,656
  • If they don't notify the Marketplace, the advance credit payments will stay at $9,600
  • The additional premium tax credit reduces to $1,056

KEY TERMS

Applicable Percent

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

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.

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