01Premium tax credit
Lowers what you pay each month
A federal tax credit applied to your marketplace premium. You can take it in advance so your monthly bill is smaller, or claim the whole thing when you file your federal tax return.
Savings
How marketplace savings actually work.
Two different programs get called subsidies. One lowers your monthly premium, the other lowers what you pay at the doctor, and only one of them requires a Silver plan.
Two kinds of help
Premium savings and cost savings are separate.
They are calculated differently, they apply differently, and one of them is easy to forfeit by choosing the wrong metal tier.
02Cost-sharing reductions
Lowers your deductible and copays
Extra savings built into Silver plans for households whose income qualifies. They raise what the plan pays, so your deductible, copays, and out-of-pocket maximum go down.
03Medicaid and CHIP
Free or low-cost coverage in some cases
If your household income is low enough, you or your children may qualify for Medicaid or CHIP instead. Those programs accept applications all year, with no enrollment window.
04Employer coverage
What disqualifies a credit
If you are offered job-based coverage that meets the federal affordability and minimum value standards, or you are eligible for Medicare or Medicaid, you generally cannot use a premium tax credit.
The mechanics
Where the number comes from.
- Your credit is based on your estimated household income for the coverage year, your household size, your age, and where you live.
- The math uses a benchmark plan, the second lowest cost Silver plan available to your household in your area. The credit is the difference between the cost of that benchmark plan and the share of income you are expected to contribute.
- You can apply the credit to any metal tier, not only to the benchmark plan. Put it toward a Bronze plan and your monthly cost drops further; put it toward Gold and you pay the difference.
- Because the credit is tied to the benchmark, it moves when local plan prices move, which is why the same household can see a different credit from one year to the next.
- Cost-sharing reductions are a separate benefit, are based on income, and only take effect if you enroll in a Silver plan.
- Eligibility rules and the income bands they use are set by federal law and can change. The marketplace application applies the current rules to your household.
Keep it accurate
Report these changes when they happen.
Your advance credit is based on an estimate you made about a year you have not lived yet. Updating the marketplace when something changes keeps your monthly amount close to what you actually qualify for, and prevents a bill at tax time.
- A raise, a new job, a lost job, or a change in self-employment income
- Getting married or divorced
- Having a baby, adopting, or a child aging off the plan
- Moving to a different county or state
- Becoming eligible for Medicare, Medicaid, or job-based coverage
- Any change in who is claimed on your tax return
At a glance
Four things to remember.
- the only tier where cost-sharing reductions apply
- Silver
- the second lowest cost Silver plan sets your credit
- Benchmark
- reconciles the advance credit on your tax return
- Form 8962
- can receive the premium tax credit
- Any tier
Good to know
Questions people ask about subsidies.
How do I know what I qualify for?
The marketplace application calculates it from your household information. Any estimate you see before that, here or anywhere else, is an estimate. Entering your ZIP code and household details is the fastest way to get a number that reflects the actual plans and prices in your county.
What happens at tax time?
If you took the credit in advance, you reconcile it on your federal tax return using Form 8962 and the Form 1095-A the marketplace sends you. If you earned less than you estimated, you may get more credit back. If you earned more, you may have to repay part of it, which is exactly why reporting income changes during the year matters.
Can I get a $0 premium plan?
Some households do, because the premium tax credit can cover the full cost of certain plans in their area. Whether that is true for you depends on your income, household size, age, and the plans sold in your county, so it is not something anyone can promise in advance. Note that a $0 premium plan still has a deductible and copays.
Do I have to take the credit in advance?
No. You can take some, all, or none of it in advance. Taking less during the year lowers the chance of owing money back at tax time, and you claim the remainder when you file. Taking it in advance helps most when the monthly premium is what makes coverage possible.
Does a subsidy change the plan I get?
The premium tax credit does not change the plan itself, only what you pay for it. Cost-sharing reductions do change the plan, by giving you a Silver plan version with a lower deductible, lower copays, and a lower out-of-pocket maximum than the standard version.
Your household
Find out what you qualify for.
Enter your ZIP code to see marketplace plans with your estimated savings already applied.