What Is the Premium Tax Credit for 2024 Health Coverage?

The Premium Tax Credit (PTC) is a refundable credit designed to help individuals and families afford health insurance purchased through the Health Insurance Marketplace by reducing their monthly premium payments. The provisions discussed here apply to the 2024 tax year, which taxpayers will file in 2025.

Determining Your Eligibility for 2024

Eligibility for the Premium Tax Credit primarily depends on household income. Your modified adjusted gross income must be at least 100% of the Federal Poverty Level (FPL) for your family size. For 2024 coverage, the relevant FPL figures are those from the prior year, with the 100% FPL threshold being $14,580 for a single individual and $30,000 for a family of four.

A temporary rule change for tax years 2023 through 2025 allows taxpayers with household incomes above 400% of the FPL to qualify for the credit. This provision, extended by the Inflation Reduction Act, eliminates the previous income cap. Eligibility is now determined by whether the cost of a benchmark health plan exceeds a specific percentage of the household’s income, preventing a sudden loss of assistance for a small increase in earnings.

Other eligibility conditions must also be met. You or a family member must have been enrolled in a Marketplace plan for at least one month in 2024, and you cannot be claimed as a dependent. If you were eligible for affordable coverage through an employer or a government program like Medicare or Medicaid, you are not eligible for the PTC for those months.

To receive the credit, you must file a federal income tax return. If married, you must file a joint return with your spouse, as the Married Filing Separately status generally disqualifies you from the credit. An exception exists for certain victims of domestic abuse or spousal abandonment.

Calculating the Credit Amount

The amount of your Premium Tax Credit is based on a sliding scale relative to your income. The calculation uses two figures: the premium for a “benchmark” health plan and your expected annual contribution. Your final credit is the difference between these two amounts, which standardizes the assistance regardless of the plan you actually choose.

The first component is the premium for the second-lowest cost Silver plan (SLCSP) available to your family through the Marketplace in your area. This plan serves as the benchmark, and its premium is reported on Form 1095-A. You do not have to be enrolled in the SLCSP to use its premium for this calculation.

The second component is your expected contribution, which is a percentage of your household income. For 2024, this percentage ranges from 0% for those with income up to 150% of the FPL to 8.5% for those with income at or above 400% of the FPL. For instance, a household at 250% of the FPL is expected to contribute 4.0% of their income toward premiums.

For example, a family with a $60,000 income might have an expected contribution of 4.0% ($2,400 per year, or $200 per month). If the monthly premium for their SLCSP benchmark plan is $1,000, their credit would be $800 per month ($1,000 – $200). This credit can be used to lower the cost of any Marketplace plan.

Receiving and Reconciling the Credit

You have two options for receiving the Premium Tax Credit. The most common method is to receive advance payments of the credit (APTC), which are estimated amounts paid directly to your insurer each month. This directly lowers your out-of-pocket premium payments throughout the year.

The alternative is to pay the full monthly premium for your Marketplace plan all year and then claim the entire credit when you file your tax return. In this scenario, the full credit you are owed will either increase your tax refund or decrease the amount of tax you owe.

Since the APTC is based on an estimate of your income and family size, you should report life changes to the Health Insurance Marketplace during the year. Events like marriage, birth of a child, or a change in income can alter your final credit amount. Updating the Marketplace allows for adjustments to your monthly APTC, which helps prevent a large discrepancy at tax time.

Both options require a final accounting on your tax return called reconciliation. This process involves comparing the total APTC you received with the actual credit you qualify for based on your final income. If you received less APTC than you were eligible for, the difference increases your tax refund. If you received too much, you must repay the excess amount, subject to repayment caps based on income.

Required Tax Forms and Filing

The first document you need is Form 1095-A, Health Insurance Marketplace Statement, which is not filed with your tax return but is necessary for completing it. The Marketplace is required to send this form by early February of the year following coverage, and it is often available in your online Marketplace account sooner.

Form 1095-A details the total monthly premiums for the health plan you were enrolled in. It also lists the premium for the applicable second-lowest cost Silver plan (SLCSP), which serves as the benchmark for calculating your credit. It also shows the total amount of Advance Premium Tax Credit (APTC) that was paid on your behalf directly to your insurer.

Using the data from Form 1095-A, you must complete Form 8962, Premium Tax Credit (PTC). On this form, you will calculate your actual credit and reconcile it with any advance payments you received. Filing Form 8962 is mandatory if any APTC was paid for you or your family.

The result from Form 8962 carries over to your main tax return, Form 1040. If you are due an additional credit, the amount is reported on Schedule 3 to reduce your total tax. If you must repay excess APTC, the repayment amount is reported on Schedule 2, which increases your tax liability.