Premium Tax Credit
An ACA refundable tax credit that helps eligible individuals and families pay for health insurance on the marketplace.
What is Premium Tax Credit?
The premium tax credit (PTC) is a refundable federal tax credit created by the Affordable Care Act to help eligible individuals and families with incomes between 100% and 400% of the federal poverty level (FPL) afford health insurance purchased through the ACA marketplace. The Inflation Reduction Act (IRA) of 2022 temporarily expanded eligibility above 400% FPL and made the credit more generous; these expansions were extended through 2025. The credit amount is based on the difference between the second-lowest-cost Silver plan premium in the enrollee's area and a maximum percentage of household income they are expected to contribute. Enrollees may take the credit in advance to reduce monthly premiums or claim the full amount on their tax return. If advance payments exceed the final credit amount (due to higher actual income), the excess must be repaid at tax time.
Example
A 35-year-old individual with a $50,000 income (roughly 385% FPL in 2024) qualifies for a premium tax credit. The benchmark Silver plan in their area costs $550/month. They are expected to contribute no more than 8.5% of income ($354/month). The credit covers the remaining $196/month, reducing their effective premium to $354.
Source: IRS — Premium Tax Credit