Premium tax credit (PTC) is a refundable tax credit meant to provide financial relief to eligible families and individuals making it possible for them to afford health insurance purchased via the health insurance marketplace. However to be eligible for PTC you’re expected to meet certain requirements.
How much is PTC:
The amount of Premium tax credit you can receive is affected by the factors below:
- Household or individual’s income – this is a crucial factor that impacts the amount of PTC paid to an individual or household. It is expected that your income should fall within the range of the federal poverty line. Specifically, your household income on tax returns should be within 400% of the federal poverty line. Once this limit is exceeded
- Credit calculator: The specific amount you can receive as premium tax credit is calculated with regards to your family size, income, and the cost of your health insurance plan. If there is a high cost of living in your area then you may qualify for more PTC.
- Sliding scale: The amount you receive as premium tax credit reduces as your income increases. Typically the more you earn, the more the amount of your PTC reduces.
However, the amount of premium tax credit you can receive is equivalent to the premium for the second lowest cost silver plan(SLCSP) available via the health insurance marketplace in your state which applies to an individual or household minus a percentage of your household income. Additionally, this does not mean that you must choose the second lowest cost silver plan as your health insurance plan to qualify. The second lowest silver plan is simply a benchmark used by the government to determine the amount of individual or household premium tax credit. For this reason, your PTC amount cannot exceed the cost of the second lowest cost silver plan.
Discover more answers to any questions related to your premium tax credit here.
What is the requirement and who qualifies for premium Tax credit
The following are requirements you must meet before you qualify for premium tax credit:
- The fundamental requirement to be considered for any federal government benefit is to be a United States citizen.
- Your income or household income, that is your income and the adjusted gross income of every member of your family must fall within certain limits. Generally, your household income should fall between 100% to 400% of the federal poverty line to benefit from premium tax credit.
- Enrollment in a health insurance plan via the insurance marketplace. This is crucial as the government makes use of the health insurance plan via the marketplace to determine the amount you receive as premium tax credit. So if you decide to choose a health insurance plan outside of the marketplace, you will not be considered for PTC.
- You should not be claimed as a dependent by another person.
- You are also considered qualified if you or a family member are not eligible for government health care programs like medicare, medicaid etc.
However, it is important to know that the premium tax credit requirements are subject to and may change in the near future so ensure to stay up to date with the latest requirements. You may decide to consult a tax professional to get the most accurate and updated information on the requirement for premium tax credit. Additionally, if you are already on an affordable employer sponsored health insurance, you are not qualified for premium tax credit benefits. For more information, visit the IRS official site.
How to claim Premium Tax credit
To claim your premium tax credit returns you must file your federal income tax returns. This method is regarded as reconciliatory. This is because it assists the government in knowing whether or not the amount you or your family received as premium tax credit was enough or more than enough. Generally, this method of claiming your premium tax credit ensures that you receive the right payment for your PTC.
