What Are the Premium Tax Credit Income Limits?

The Premium Tax Credit, or PTC, is a refundable tax credit from the federal government designed to help make health insurance coverage more affordable. It directly lowers the monthly premium costs for qualifying individuals and families who purchase their health plan through the Health Insurance Marketplace. This financial assistance is a provision of the Affordable Care Act. How you receive the credit is determined during enrollment and reconciled on your annual tax return.

Core Eligibility Requirements for the Premium Tax Credit

Beyond income, several requirements must be met to qualify for the Premium Tax Credit. The first is that you or a family member must enroll in a health insurance plan through the Health Insurance Marketplace. Coverage obtained from other sources, such as an employer, Medicare, or Medicaid, does not qualify for this specific credit.

Another requirement is that you cannot be claimed as a dependent on someone else’s tax return. If your parents, for example, claim you as a dependent, you are not eligible to receive the PTC for your own coverage. This rule applies regardless of whether you file your own tax return.

Your tax filing status is also a factor. If you are married, you must file a joint return with your spouse to be eligible for the credit.

Finally, you cannot be eligible for other “minimum essential coverage.” This includes most government-sponsored programs like Medicare Part A or Medicaid, as well as affordable, qualifying job-based insurance. If your employer offers a plan that meets specific standards of affordability and value, you are ineligible for the PTC, even if you decline the employer’s plan.

Understanding the 2025 Income Thresholds

Eligibility for the Premium Tax Credit is closely tied to your household income’s relationship with the Federal Poverty Level (FPL). For 2025 health coverage, the income thresholds are determined using the 2024 FPL figures. Historically, a primary rule for PTC eligibility was that a household’s income had to be between 100% and 400% of the FPL for their family size.

However, the Inflation Reduction Act extended a provision through 2025 that eliminated the strict 400% FPL income cap. For 2025, if your income is over 400% of the FPL, you may still qualify for the credit if the premium for the second-lowest cost Silver plan in your area would cost more than 8.5% of your household income. This change ensures that more households can receive assistance.

Even with the expanded eligibility, the 100% FPL threshold remains important. For a single individual in 2025, 100% of the FPL is $15,060. For a two-person household, the amount is $20,440, and for a family of four, it is $31,200. In states that did not expand their Medicaid programs, individuals with incomes below 100% of the FPL are not eligible for the PTC.

The amount of credit you receive is calculated on a sliding scale. The goal is to ensure you do not have to pay more than a certain percentage of your income toward premiums. This percentage starts low for those with incomes near 100% of the FPL and increases as income rises, capping at 8.5% for those with higher incomes.

Calculating Your Modified Adjusted Gross Income (MAGI)

To determine if your income falls within the eligible range for the Premium Tax Credit, you must calculate your Modified Adjusted Gross Income (MAGI). This calculation differs from your regular Adjusted Gross Income (AGI). The starting point for your MAGI calculation is the AGI found on your federal income tax return.

Your AGI includes your taxable income sources, such as wages, salaries, and unemployment compensation. It is your gross income minus certain “above-the-line” deductions, like contributions to a traditional IRA or student loan interest payments.

From your AGI, you must then add back certain types of non-taxable income to arrive at your MAGI. The most common additions are any untaxed foreign earned income, tax-exempt interest, and the non-taxable portion of your Social Security benefits.

The final MAGI figure includes the income of every member of your household who is required to file a tax return. This means you must sum the MAGI of yourself, your spouse, and any dependents who have a filing requirement. This combined household MAGI is the number you will compare to the Federal Poverty Level thresholds.

Reconciling the Credit on Your Tax Return

When you file your federal income tax return, you must account for any Premium Tax Credit you are eligible for, a process known as reconciliation. This is done using Form 8962. This form compares the amount of advance credit payments you received during the year with the actual credit amount you qualify for based on your final, year-end income.

Many people choose to receive the PTC in advance, paid directly to their insurance company each month to lower their premium payments. These are called Advance Premium Tax Credit (APTC) payments. When you enroll, the Marketplace estimates your expected household income for the year to determine your APTC amount. If your final MAGI is different from the estimate, you will need to reconcile the difference.

If your final income is higher than what you estimated, you may have received too much APTC. In this scenario, you will have to repay some or all of the excess credit, which will reduce your tax refund or increase your tax liability. Conversely, if your income ends up being lower than estimated, you may be eligible for a larger credit, which will increase your refund or lower the amount of tax you owe.

Alternatively, you may have chosen not to receive any advance payments during the year. In this case, you can claim the entire Premium Tax Credit you are eligible for when you file your tax return. By completing Form 8962 with your final income figures, you can calculate the full credit amount and have it applied directly to your tax liability.