What Is the Premium Tax Credit for Health Insurance?

What Is the Premium Tax Credit for Health Insurance?

A premium tax credit is a form of financial assistance. It helps with the cost of buying health insurance. Before you enroll in a new plan, check to see if you qualify for a tax credit.

Who is Eligible?

Premium tax credits are for individuals and families who:

  • Have a household income between the federal poverty line and 400% of the poverty line
  • Purchased a Health Insurance Marketplace plan (either on the Marketplace or an eligible plan via your insurer’s website)
  • Are U.S. citizens or lawfully present in the United States

You are not eligible if you can get affordable coverage through your job, or if you qualify for one of the following:

  • Medicare
  • Medicaid
  • Children’s Health Insurance Program (CHIP)

Learn how to estimate your income for the Marketplace. leaving site icon

How Does the Tax Credit Work?

Information you give on your Marketplace application about your income, family size and type of plan you buy is used to see if you qualify for a premium tax credit.

If you do qualify, you can decide if you want to have all, some or none of your estimated credit applied to your plan’s monthly premiums.

If you choose not to use the credit toward monthly premiums, you can claim the credit when you file your tax return for the year. This will either lower the amount of taxes you owe or increase your refund.

If you choose to have all or some of the credit paid in advance, you may have to reconcile this on your income tax return. In some cases, the amount of advance payments the government sent on your behalf may differ from the premium tax credit you may claim.

Why Would the Amount Be Different?

If there is a change in your family size, income or employment during the year, the amount of your premium tax credit can change. Be sure to update this information in your Marketplace account. Doing so lowers the chance that there could be a difference between your advance credit payments and the actual premium tax credit.

Here are a few events that can affect the amount of your premium tax credit:

  • Your household income changes
  • You get married, divorced, or have a child
  • You gain employer-sponsored health care coverage

If you don’t report these changes to the Marketplace, your actual premium tax credit may differ from the credit originally estimated by the Marketplace.    

How Does a Premium Credit Affect My Taxes?

The Marketplace will send you a 1095-A form showing your premium amount and advance premium tax credit. You will use this information to report your coverage on your tax return.

We know premium tax credits can be confusing. If you still have questions, a tax advisor can help. You can also find more information at healthcare.gov/taxes leaving site icon or at irs.gov. leaving site icon

Do You Qualify for a Tax Credit?

Find out. Use our Premium Tax Credit Estimator tool to see if you qualify for a premium tax credit.

Originally published 8/18/2015; Revised 2018, 2022, 2023