The Affordable Care Act (ACA) has helped millions of Americans gain access to affordable health coverage. One of the keyways it does this is through subsidies and tax credits, which can significantly reduce monthly health insurance costs. Learn what changes to consider during AEP to maximize your Medicare benefits and stay covered with the right plan for your needs.But how do these work, and how can you benefit from them?
In this blog, we’ll break down the basics of ACA subsidies and tax credits, how they are calculated, and what you need to do to qualify. We’ll also explain how your income plays a role and when you may need to repay some of these credits. If you’re looking to lower your health insurance premiums, understanding these factors is essential.
What Are ACA Subsidies and Tax Credits?
The ACA offers two main types of financial help for people purchasing health insurance through the Marketplace:
Both forms of assistance are available depending on your household income and family size. The goal is to make health coverage more affordable, ensuring that more people have access to the care they need.
Premium Tax Credits Explained
One of the biggest benefits of the ACA is the premium tax credit. This credit directly reduces how much you pay each month for your health insurance plan. The amount you can receive is based on your household income as it relates to the federal poverty level (FPL).
For example, if your household income falls between 100% and 400% of the FPL, you are likely eligible for a premium tax credit. This means that if you earn more than the poverty line but less than 400% of it, the government will help cover part of your premium costs.
If your income is between 100% and 150% of the FPL, you may even qualify for a plan with zero-dollar premiums in some cases, thanks to the tax credit covering your full premium.
How Are Premium Tax Credits Calculated?
The amount of your premium tax credit is determined by comparing your household income to the federal poverty level and the benchmark plan in your area. The benchmark plan is the second lowest-cost silver plan available in the Marketplace, and it is used to set the standard for affordability.
The premium tax credit ensures you won’t have to pay more than a set percentage of your income on health insurance premiums. This percentage is determined by a sliding scale, so the lower your income, the larger your tax credit.
It’s important to remember that these tax credits can be applied in advance to lower your monthly premium or be claimed when you file your federal tax return at the end of the year.
Income Limits for ACA Subsidies
While anyone can shop for coverage through the ACA Marketplace, not everyone qualifies for financial assistance. The main factor in determining eligibility for subsidies is your income level.
For the 2024 coverage year, the income range to qualify for subsidies starts at 100% of the federal poverty level, which is $14,580 for an individual and $30,000 for a family of four. The upper limit, which is 400% of the federal poverty level, is $58,320 for an individual and $120,000 for a family of four.
Even if your income is above 400% of the FPL, you may still qualify for some help thanks to changes made in recent years that have temporarily expanded eligibility for subsidies.
If you have questions or need assistance finding an ACA plan, call one of our
Licensed Agents at Trusted Senior Specialists.
There is no cost or obligation for a consultation!
We are available Monday through Friday from 8 AM to 8 PM CST,
and on Saturday by appointment.
You can reach us by calling: 1-855-952-1941 TTY: 711
By calling this number you may be connected with a licensed agent