The Premium Tax Credit (PTC) is a refundable tax credit that can lower your health insurance premium costs if you’re enrolled in a healthcare plan through the national Health Insurance Marketplace or a state marketplace. You also cannot be eligible for an insurance plan through your employer or the government. If eligible, you can receive the benefit monthly to lower your insurance costs or in full the next year, when filing your tax return.
Your salary also plays a role in your eligibility. Your income must also fall between 100% and 400% of the federal poverty level for your household size, for the current tax year. You also cannot file your taxes separately (if married) and cannot be claimed as a dependent.
When you enroll in a marketplace healthcare plan, your income will be evaluated to determine if you’re eligible for advanced monthly payments of the PTC to help lower your monthly health plan costs. If you opt out of advanced payments, you can claim the credit at the end of the tax year.
If you do receive advance payments based on your estimated income for the year and end up making a higher annual salary than expected, you may need to repay some of the benefits you received throughout the end of the year when filing your tax return. And, if you’re not usually required to file your taxes, but received the Premium Tax Credit, you do have to file a return.
Note: The American Rescue Plan Act of 2021 (ARPA) temporarily expanded benefits for tax years 2021 and 2022, making it possible to qualify for this credit even if your income exceeds 400% of the federal poverty level.