Health Insurance Premium Credit Calculator

What is a Health Insurance Premium Credit?

The Health Insurance Premium Tax Credit (also known as the Advanced Premium Tax Credit or APTC) is a federal subsidy available through the Affordable Care Act (ACA). It helps make health insurance more affordable for low- and moderate-income individuals and families.

The credit reduces the amount of premium you pay for health insurance purchased through the Health Insurance Marketplace. The amount of the credit depends on your income, household size, and the cost of the silver plan in your area.

How the Health Insurance Premium Credit Works

The Health Insurance Premium Tax Credit is calculated based on your income and household size. The formula used to determine the credit is:

Where:

• Monthly Premium is the cost of the silver plan in your area
• Federal Poverty Level is the official poverty level set by the U.S. government
• Income is your total household income

The credit is applied to your health insurance premium, reducing the amount you pay each month. The credit is recalculated each year based on your income and household size.

Eligibility Requirements

To qualify for the Health Insurance Premium Tax Credit, you must meet the following requirements:

• You must live in the United States
• You must be a U.S. citizen or lawful permanent resident
• You must not be eligible for other coverage, such as employer-sponsored insurance or Medicare
• Your household income must be between 100% and 400% of the federal poverty level

The federal poverty level is updated annually by the U.S. Department of Health and Human Services. For 2023, the federal poverty level for a family of four is $28,224.

Worked Examples

Let's look at two examples to illustrate how the Health Insurance Premium Credit works.

Example 1: Single Person with Income of $25,000

For a single person with an income of $25,000, the federal poverty level is $12,880. The income ratio is $25,000 / $12,880 = 1.94. The credit is calculated as:

This means the credit is equal to 2.72 times the monthly premium. For example, if the monthly premium is $300, the credit would be $816.

Example 2: Family of Four with Income of $40,000

For a family of four with an income of $40,000, the federal poverty level is $28,224. The income ratio is $40,000 / $28,224 = 1.42. The credit is calculated as:

This means the credit is equal to 1.23 times the monthly premium. For example, if the monthly premium is $400, the credit would be $492.