Premium Tax Credits

Assuming the other requirements are met, a person is eligible for premium tax credits if his/her family income is between 100% and 400% of the federal poverty level.  The amount of the federal poverty level is based on family size.   For 2015 the Federal Poverty level for each state except Alaska, & Hawaii is $11,770 for the 1st person plus $4,160 for each additional individual in the family.  In other words the bigger the family, the higher the number.

Here is a chart showing various multiples of the 2015 federal poverty level based on family size.

 

If you live in a Medicaid expansion state, you will be eligible for Medicaid if  your income is below 138% of the Federal Poverty Level.

The subsidy is expressed as a premium cap which limits your cost as a % of your income.  It calculated based on a specific plan (the 2nd lowest cost silver plan) available in your area.  You pay the lesser of the premium premium cap or the actual premium.  Essentially, the less you make, the less you pay as a % of your income.  The chart below shows the cost of the 2nd lowest cost Silver plan as % of someone’s income at different poverty levels.

CostCurveFPL

Once determined, the subsidy is a fixed amount of money available on all of the Marketplace plans (except Catastrophic plans).  In some cases people qualify for enough tax credit to purchase a plan with a $0 premium.

The premium tax credits can be received in advance to help offset the cost of the insurance premiums; however, they can also be taken when a person completes his her tax return.

The Marketplace will make its determination about a person’s eligibility for a tax credit based on information provided by the applicant and other information available to the Marketplace.  This determination is not guaranteed to be correct.  A persons circumstances may change or certain facts used to make the determination may have been incorrect.

The IRS will reconcile the determination made by the Marketplace with information provided by the individual, as well as the individual’s employer for tax reporting.  If the IRS later determines that a person was not eligible for a tax credit or if the amount of the credit was incorrect, the IRS will correct this and apply the result of the change to the individual’s tax return; however, there are caps on the amount you must pay back if your household income is still less than 400% of the federal poverty level.

Q.        How much do I have to pay back if my income is less than 400% of FPL.

A.

Cap on Amount You  Must Pay Back

Income as % of FPL

Single

Any other filing status

Under 200%

$300

$600

Under 300%

$750

$1,500

Under 400%

$1,250

$2,500

400% & Above

You must pay it all back!

 

Q.        You say that people who make between 100% and 400% of the federal poverty level can qualify.  What if someone makes less than 100% of the federal poverty level.

A.        U.S. Citizens who make less than 100% of the federal poverty level will not eligible for premium tax credits; however, they can still purchase insurance on the Marketplace.  In some states adults with incomes below 138% of the federal poverty level will be eligible for Medicaid; however, the Supreme Court ruled that States do not have to participate in the expansion.

Click here to see which states are or are not participating in the expansion.  If you live in a state participating in the expansion, you should be automatically enrolled in Medicaid if it is determined that your income falls below the threshold.

If you live in a state that does not participate in the expansion, you may or may not qualify for Medicaid.  So it is possible that you won’t qualify for subsidized health care under Obamacare and you won’t qualify for Medicaid either.  Citizens who qualify for Medicaid are supposed to be enrolled in the Medicaid program.

Non-citizens who are lawfully present can also qualify for premium tax credits if their household income is less than 100% of the federal poverty level.

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