The Premium Tax Credit is for people who bought health insurance through the federal or state marketplace and earned between roughly 100% and 400% of the federal poverty line

The Premium Tax Credit reduces what you pay for monthly health insurance premiums. You report it on your tax return using Form 8962. The IRS sends advance payments of this credit directly to your insurance company during the year, lowering your monthly bill. When you file taxes, you reconcile what you actually received against what you were may have access to to receive based on your final income.

You can only claim this credit if you bought coverage through the Health Insurance Marketplace (Healthcare.gov or your state's marketplace) — not through an employer, Medicaid, Medicare, or a private broker. Your household income for the year must fall within a range set by the federal poverty line. That range changes yearly and varies by family size, but it generally starts around 100% of the poverty line and goes up to 400%.

If you earned more than 400% of the poverty line, you do not may have access to. If you earned less than 100% of the poverty line, you may may have access to for Medicaid instead, depending on your state. The credit is not a refund — it is a reduction in the cost of insurance you actually bought and used.

Key Takeaways

  • You must have purchased health insurance through the Marketplace (Healthcare.gov or a state marketplace) to claim the Premium Tax Credit.
  • Your household income must fall between roughly 100% and 400% of the federal poverty line for the year you are reporting.
  • The IRS sends advance credit payments to your insurance company during the year, and you reconcile the actual amount on Form 8962 when you file taxes.
  • If your actual income was lower than you estimated when you enrolled, you may receive a refund; if it was higher, you may owe back some of the credit.
  • Employer-sponsored insurance, Medicaid, Medicare, and coverage bought outside the Marketplace do not may have access to for this credit.

Income limits based on family size and poverty line

The income range for the Premium Tax Credit is tied to the federal poverty line, which the Department of Health and Human Services updates each year. For 2024, the poverty line for a single person is about $15,000; for a family of four, it is about $31,000. The credit is available to people earning between 100% and 400% of that line.

This means a single person in 2024 could earn roughly $15,000 to $60,000 and still may have access to. A family of four could earn roughly $31,000 to $124,000. These numbers shift annually. When you enroll in the Marketplace, you estimate your household income for that year, and the Marketplace uses that estimate to calculate your advance credit. The exact income limits for your situation appear on the Marketplace website when you start an process.

If you earned more than the upper limit, you must repay some or all of the advance credit you received. If you earned less than you estimated, you may receive the difference as a refund when you file your return. This is why reporting your actual income on Form 8962 is critical — the IRS compares what you received to what you should have received.

What counts as household income for this credit

Household income for the Premium Tax Credit includes wages, self-employment income, taxable interest, dividends, capital gains, rental income, and most other sources of income you report on your tax return. It also includes income of your spouse and any dependents you claim, even if they do not file their own return.

Some income does not count. Supplemental Security Income (SSI), certain tribal payments, and nontaxable combat pay are excluded. If you received unemployment benefits in 2021, you could exclude up to $10,200 of that income when calculating your credit for that year — but this was a temporary rule that expired. For current years, unemployment is counted as income.

The Marketplace asks you to estimate your household income when you enroll. Use your most recent tax return as a starting point, then adjust for changes you expect during the year — a job loss, a raise, a new business, a spouse's income. The more accurate your estimate, the closer your advance credit will be to what you actually owe, and the smaller your reconciliation will be at tax time.

How advance credit payments work during the year

When the Marketplace approves you for the Premium Tax Credit, the IRS calculates a monthly amount based on your estimated income and family size. This amount goes directly to your insurance company each month, reducing your premium bill. You pay the difference between your full premium and the advance credit.

You do not have to do anything to receive the advance credit — the Marketplace and IRS handle it automatically. However, you can ask the Marketplace to send you the credit as a refund instead of reducing your premium, though most people let it reduce their bill because that lowers their out-of-pocket cost when ready.

The advance credit is an estimate. It is based on the income you reported when you enrolled. If your actual income changes during the year — you get a raise, lose a job, get married, have a child — you should report the change to the Marketplace as soon as possible. The Marketplace will recalculate your credit and adjust your monthly payments going forward. Reporting changes promptly prevents a large bill or refund when you file your return.

Reconciling your credit on Form 8962

When you file your tax return, you must report the advance Premium Tax Credit payments you received on Form 8962, Form 8962 Instructions. This form compares the total advance credit you got during the year to the total credit you were may have access to to based on your actual income and family size.

You will need the Form 1095-B (Health Insurance: Coverage) that your insurance company sends you, which shows the months you had coverage. You will also need any Form 1095-A (Health Insurance Marketplace Statement) the Marketplace sends you, which lists the advance credit payments made on your behalf. Gather these documents before you start your return.

If your actual income was lower than you estimated, the IRS owes you the difference — you get a refund. If your actual income was higher, you repay the difference. Some people owe back hundreds of dollars if their income rose significantly during the year. This is why updating the Marketplace when your income changes is important — it keeps the advance credit aligned with reality.

Who does not may have access to for the Premium Tax Credit

You do not may have access to if you have access to affordable employer-sponsored health insurance. The IRS defines "affordable" as coverage that costs no more than about 8.39% of your household income (this percentage changes yearly). If your employer offers a plan at that cost or less, you are not may be able to access for the Marketplace credit, even if you choose not to take the employer plan.

You also do not may have access to if you are covered by Medicare, Medicaid, CHIP (Children's Health Insurance Program), TRICARE, or the Veterans Health Administration. These programs provide their own coverage, and the Marketplace credit is not designed to layer on top of them.

If you bought insurance outside the Marketplace — through a broker, directly from an insurer, or through a short-term plan — you cannot claim the credit. The credit only applies to Marketplace plans. If your income falls below 100% of the poverty line, you may be able to get Medicaid instead, depending on your state's rules. Check your state's Medicaid program to see what income level qualifies.

What happens if your income changes during the year

If your income changes after you enroll, report it to the Marketplace right away. You can update your process online through Healthcare.gov or your state marketplace. Changes that matter include a job loss, a significant raise, marriage, divorce, the birth of a child, or a change in the number of people in your household.

When you report a change, the Marketplace recalculates your credit and adjusts your monthly advance payment going forward. If your income went down, your advance credit increases, and your premium goes down. If your income went up, your advance credit decreases, and your premium goes up. These changes take effect in the month after you report them.

If you do not report a change and your income rises, you will owe back some of the advance credit when you file your return. If your income falls and you do not report it, you will miss out on a larger credit and may get a refund at tax time. Staying current with the Marketplace prevents surprises.

Frequently Asked Questions

Can I claim the Premium Tax Credit if I have a job that offers health insurance?

Only if the employer plan costs more than about 8.39% of your household income. If your employer offers a plan at that cost or less, you are not may be able to access for the Marketplace credit. Check your offer letter or benefits summary to see what the employee premium is, then calculate it as a percentage of your expected household income.

What if my income goes above 400% of the poverty line during the year?

You can still keep your Marketplace coverage and the advance credit payments you received. However, when you file your tax return, you will have to repay the portion of the credit you were not may have access to to. The amount depends on how much your income exceeded the limit and for how long.

Do I have to report the advance credit payments on my tax return?

Yes, you must file Form 8962 with your return to reconcile the advance payments. Even if you owed no federal income tax, you still file Form 8962 to report the credit. If you do not file it, the IRS may deny the credit entirely or delay your refund.

What if I did not receive a Form 1095-A from the Marketplace?

Contact the Marketplace directly to request it. You need this form to complete Form 8962. If the Marketplace cannot locate your record, you can file Form 8962 with the information you have and explain the missing form in a note to the IRS.

Can I claim the Premium Tax Credit if I am self-employed?

Yes. Your self-employment income counts toward the income limit. You will report your net self-employment income on Schedule C, and that amount is used to calculate your credit. You must still buy coverage through the Marketplace to claim the credit.