What Is the Premium Tax Credit and How Can It Lower Your Marketplace Insurance Cost?
Do You Have to Use Your Entire Premium Tax Credit Each Month?
Shanti
9/25/20262 min read
What Is the Premium Tax Credit and How Can It Lower Your Marketplace Insurance Cost?
If you apply for health insurance through the Health Insurance Marketplace, you may qualify for financial assistance that can help lower your monthly health insurance premium.
This financial assistance is called the Premium Tax Credit.
What Does the Premium Tax Credit Do?
The Premium Tax Credit can reduce the amount you pay each month for your health insurance premium.
For example, if the full cost of your health insurance plan is $600 per month and you qualify for a $450 Premium Tax Credit, your monthly payment could be reduced to approximately $150.
How Is the Amount of Financial Assistance Determined?
The amount of Premium Tax Credit is different for each person or family. When reviewing your application, the Marketplace considers several factors, including:
• Your estimated annual household income
• The number of people in your household
• Where you live
• The ages of your household members
• The cost of health insurance plans available in your area
Because everyone’s situation is different, two families may qualify for different amounts of financial assistance.
Why Is It Important to Report Your Income Accurately?
Your Premium Tax Credit is calculated based on the income you expect your household to earn during the coverage year.
When you file your federal tax return, your actual household income is compared with the financial assistance you received during the year.
If your income changes during the year, for example, because you start a new job, your income increases or decreases, you get married, or your household situation changes, it is important to update your Marketplace application.
Keeping your information current can help make sure your Premium Tax Credit reflects your actual situation and may reduce the possibility of an unexpected amount owed when you file your tax return.
Do You Have to Use Your Entire Premium Tax Credit Each Month?
No. If you qualify, you can choose to use all or part of your Premium Tax Credit in advance to reduce your monthly health insurance premium.
The final amount of Premium Tax Credit you qualify for is determined and reconciled when you file your federal income tax return based on your actual information for the year.
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