How the Premium Tax Credit income limits work
The Premium Tax Credit phases out as your income rises. The IRS sets income thresholds each year based on the federal poverty line for your household size. If your income falls below a certain level, you may receive the full credit. If it rises above that level, the credit shrinks. If it goes high enough, you receive no credit at all.
The credit is tied to your Modified Adjusted Gross Income (MAGI), not your raw income. MAGI is usually your adjusted gross income plus certain excluded foreign income. For most people, it matches what appears on line 11 of Form 1040. The IRS compares your MAGI to the federal poverty line for your household size and calculates what percentage of the poverty line your income represents. That percentage determines your credit amount.
Income limits change every year because the federal poverty line adjusts annually. The 2024 limits are different from 2023, and 2025 limits will differ again. You need to check the current year's limits when you file, not rely on prior years.
Key Takeaways
- Premium Tax Credit income limits are set as a percentage of the federal poverty line and change every year based on household size.
- Your Modified Adjusted Gross Income (MAGI) is what the IRS compares to the limit, not your total wages or salary.
- If your income is below 100% of the federal poverty line for your household size, you may not be able to use the credit because you may be Medicaid-may be able to access instead.
- If your income exceeds 400% of the federal poverty line, you receive no Premium Tax Credit, though some states have extended the credit above that threshold.
- You must report your expected income for the year you are claiming the credit, not your income from the prior year.
2024 income limits by household size
The 2024 federal poverty line for a single person is $15,060. For a family of four, it is $31,200. These figures are used to calculate the income thresholds for the Premium Tax Credit.
At 100% of the poverty line, you are at the lower boundary. At 400% of the poverty line, you are at the upper boundary where the credit phases out completely. A single person at 400% of the 2024 poverty line would have income around $60,240. A family of four at 400% would be around $124,800.
The exact credit amount depends on the cost of the second-lowest Silver plan in your area and your household size. The IRS calculates how much of that premium cost you are expected to pay based on your income percentage relative to the poverty line. The credit covers the difference between that expected amount and the actual premium.
These figures change annually. You can find the current year's poverty guidelines on the U.S. Department of Health and Human Services website, or ask your tax software to pull the current limits when you enter your income.
What happens if your income is below the poverty line
If your income falls below 100% of the federal poverty line for your household size, you may not be able to claim the Premium Tax Credit. Instead, you may be Medicaid-may be able to access. Medicaid is a separate program run by your state, and it covers people with very low income.
This creates a coverage gap in some states. If you earn just below the poverty line and your state has not expanded Medicaid, you may have no coverage option through the federal marketplace. If your state has expanded Medicaid, you can enroll in that program instead. Check your state's Medicaid office or Healthcare.gov to see whether Medicaid is available to you.
What happens if your income exceeds 400% of the poverty line
Once your income reaches 400% of the federal poverty line, the Premium Tax Credit phases out completely. You receive no credit. You can still buy a plan on the marketplace, but you pay the full premium yourself.
Some states have extended the credit above 400% using state funds. California, New York, and a few others offer additional subsidies to people earning above the federal threshold. Check your state's marketplace website to see whether your state has extended the credit. If it has, the marketplace will show you the credit amount when you enter your income.
How to report your income correctly on your tax return
When you file your tax return, you report your actual income for the year you received the Premium Tax Credit. If you received the credit in 2024, you report your 2024 income on your 2024 tax return, filed in 2025.
Use Form 8962, Premium Tax Credit (PTC) Reconciliation, to reconcile the credit. This form compares the credit you received in advance during the year to the credit you are actually may have access to to based on your final income. If you received too much credit, you owe the difference back. If you received too little, you get a refund.
Report your MAGI on line 1 of Form 8962. If your actual income was different from what you estimated when you enrolled, the reconciliation will catch it. This is why it matters to update your income with the marketplace if your situation changes during the year — it reduces the chance of owing money back at tax time.
Income changes during the year and how to report them
If your income changes after you enroll in a marketplace plan, you should report the change to the marketplace. The marketplace uses your reported income to calculate your advance credit payments. If your income rises, your credit shrinks, and you may be receiving too much credit each month. If your income falls, your credit grows, and you may be receiving too little.
You can report income changes through your Healthcare.gov account or your state marketplace website. Changes take effect the first day of the following month. If you do not report changes, you will reconcile the difference when you file your tax return, which may mean owing money back or receiving a smaller refund.
Keep records of any income changes you report to the marketplace. When you file your tax return and complete Form 8962, you will need to show your final income for the year. If the marketplace has a record of your reported changes, reconciliation is usually straightforward.
Frequently Asked Questions
Does my spouse's income count toward the income limit if we file taxes separately?
If you are married and file taxes separately, each spouse's MAGI is calculated individually. However, if you file separately, you are not may be able to access for the Premium Tax Credit at all. You must file jointly to claim the credit. This rule applies even if one spouse has very low income.
What counts as income for the Premium Tax Credit?
MAGI includes wages, self-employment income, interest, dividends, rental income, and most other sources. It excludes certain items like foreign earned income and nontaxable Social Security benefits. Your tax software or a tax professional can help you calculate your MAGI if you have multiple income sources.
If I am self-employed, how do I calculate my income for the credit?
Use your net self-employment income — your business revenue minus business expenses — to calculate MAGI. You will report this on Schedule C and then on Form 1040. If your business income varies, estimate your income for the year you are claiming the credit, not the prior year.
Can I claim the Premium Tax Credit if I am claimed as a dependent on someone else's tax return?
No. If someone else claims you as a dependent, you cannot claim the Premium Tax Credit. You must be able to claim yourself as an exemption on your own tax return to be may be able to access for the credit.
What if my income is right at the 400% threshold — do I get any credit?
If your income is exactly at 400% of the poverty line, you receive no credit. The credit phases out as you approach 400%, so at that exact point, the credit is zero. If your income is slightly below 400%, you receive a small credit amount.