Advance Premium Tax Credits
Lower healthcare costs are right around the corner.
The Advanced Premium Tax Credit (APTC) is a federal subsidy available to individuals and families who earn less than 400% of the Federal Poverty Level (FPL). This subsidy helps to pay part of your health insurance premiums in order to make your insurance more affordable. The amount of APTC you qualify for is based on your annual income compared to the Federal Poverty Level (FPL), the lower your income the higher your subsidy. Premiums are based on the second cheapest silver plan available in your states health insurance marketplace. The APTC is designed so that, if an individual or family is enrolled in the second cheapest silver plan, the premium would equal to a certain percent of annual income.
How do I know how much of a tax credit I will receive?
When applying for health insurance through your health insurance marketplace, you will need to select the option to get help paying for health insurance. You will then be asked a number of qualifying questions about family size, income, etc. to determine what percent that income is compared to the Federal Poverty Level (FPL).
Once your income compared to the FPL is known, the marketplace will determine how much of a subsidy you will receive in relation to that "silver health plan. You can use the subsidy amount toward any medical plan you want as long as you purchase it through the marketplace. This is a complicated formula and there are many options, we recommend getting the assistance from a Navigator or insurance broker if possible.
A family of four makes $47,100 a year in household income. That places the family at 200% of the FPL for 2013 (2014 may be a little higher and won't be released until later). Per ACA guidelines, the percentage the family is responsible for is 6.3% of income ($247.28 per month). If the second cheapest silver plan in the family's service area is $432.67 per month, the APTC amount is the difference ($432.67 “ 247.28) = $185.39. If you were to choose a less expensive "bronze plan, you would still receive that same $185.39 per month to go toward that lower cost plan making it more affordable for you.
How do I use my APTC?
The health insurance marketplace will automatically apply your APTC to each plan you qualify for and show you the reduced monthly premium. If you think your income may rise during the year, or your family size may decrease, you may not want to apply all of the APTC when selecting a plan. Any APTC used is based on your provided information. If your information changes, you may have to pay some of it back to the IRS at the end of the year when you file taxes. It is very important that you let the insurance company and marketplace know if your income or family status changes immediately.
What happens if I have a child during the year “ do I get more APTC?
If your family size increases, or your income decreases, you may qualify for additional APTC. If you have any life event (marriage, birth of a child, divorce, loss of coverage through work), you should contact your states marketplace, a Navigator or insurance agent and see if you are now eligible for more help paying for your health insurance.