Federal Tax Credit Health Insurance Calculator 2019

What is the federal tax credit for health insurance?

The federal tax credit for health insurance premiums is a subsidy available through the Affordable Care Act (ACA) to help individuals and families purchase health insurance through the Health Insurance Marketplace.

This credit is designed to make health insurance more affordable by reducing the amount of income subject to income tax. The credit amount varies based on your income, household size, and location.

How the tax credit works

The tax credit works by reducing your taxable income, which in turn lowers the amount of tax you owe. The credit is applied to your tax return, either as a refundable or non-refundable credit depending on your income level.

The credit can be claimed as an advance payment (paid directly to your insurance company) or as a credit on your tax return. The advance payment reduces your monthly premium, while the tax credit reduces your tax liability.

Eligibility requirements

To qualify for the federal tax credit, you must meet certain requirements:

• You must purchase health insurance through the Health Insurance Marketplace.
• You must have income that falls within the federal poverty level (FPL) guidelines.
• You must not be eligible for other coverage through an employer or government program.
• You must not be claimed as a dependent on someone else's tax return.

The income limits for the tax credit are based on the federal poverty level, which is adjusted annually. For 2019, the income limits were as follows:

How to claim the credit

There are two ways to claim the federal tax credit:

1. Advance payment: The credit is paid directly to your insurance company, which reduces your monthly premium.
2. Tax credit: The credit is applied to your tax return, reducing your tax liability.

To claim the credit, you must complete an application through the Health Insurance Marketplace. The application will determine your eligibility and the amount of the credit.

Worked examples

Let's look at two examples to illustrate how the tax credit works.

Example 1: Single person with income $15,000

For a single person with an income of $15,000, the tax credit would be calculated as follows:

• Monthly premium: $200
• Annual premium: $2,400
• Credit percentage: 8.5% (based on income and household size)
• Tax credit: $2,400 × 0.085 = $204

This means the person would receive a tax credit of $204, which reduces their taxable income by that amount.

Example 2: Family of four with income $30,000

For a family of four with an income of $30,000, the tax credit would be calculated as follows:

• Monthly premium: $400
• Annual premium: $4,800
• Credit percentage: 5.5% (based on income and household size)
• Tax credit: $4,800 × 0.055 = $264

This means the family would receive a tax credit of $264, which reduces their taxable income by that amount.