Premium Subsidy (Advance Premium Tax Credit)

Image 4Advance Premium (Subsidy) Tax Credits are available for individuals and/or families who meet certain income requirements and do not have access to affordable health insurance through their employer or another program.   Eligibility for Advance Premium (Subsidy) Tax Credits is based on a standard, called the “Federal Poverty Level,” that looks at your household income and the number of people in the household.   The size of the Advance Premium (Subsidy) Tax Credit is based on a sliding scale with those who have less income are getting a larger financial support to lower the cost of their health insurance coverage.   Individuals and/or families who make between 133 percent and 400 percent of the Federal Poverty Level may be eligible for an Advance Premium (Subsidy) Tax Credit.   This means that an individual making up to $47,520 and a family of four earning up to $97,200 may be eligible for a Advance Premium Tax Credit.


The amount of Advance Premium (Subsidy) Tax Credit that a person can receive is based on the premium for the second lowest cost Silver plan in the exchange area where the person is eligible to purchase coverage.   A Silver plan is a plan that provides the essential benefits and has an actuarial value of 70%.   A 70% actuarial value means that on average the plan pays 70% of the cost of covered benefits for a standard population of enrollees.   The amount of the Advance Premium (Subsidy) Tax Credit varies with income such that premium a person would have to pay for the second lowest cost Silver plan would not exceed a specified percentage of their income (adjusted for family size), as follows:


INCOME LEVEL                                      PREMIUM AS A PERCENT OF INCOME

Up to 138% of (FPL)                                                     2% of income

138 – 150% of (FPL)                                                      3 – 4% of income

150 – 200% of (FPL)                                                     4 – 6.3% of income

200 – 250% of(FPL)                                                      6.3 – 8.05% of income

250 – 300% of (FPL)                                                     8.05 – 9.5% of income

300 – 400% of the (FPL )                                             9.5% of income


The 2017 Federal Poverty Level (FPL) income guidelines for determining the Advance Premium (Subsidy) Tax Credit for the Affordable Care Act in which an individual may be eligible are as follows:

HOUSEHOLD SIZE            100% of FPL                400% of FPL

1                                                     $11,880                             $47,520

2                                                    $16,020                             $64,080

3                                                    $20,160                            $80,640

4                                                    $24,300                             $97,200

5                                                    $28,440                              $113,760

6                                                    $32,580                              $130,320

7                                                    $36,730                              $146,920

8                                                    $40,890                             $163,560


How does the Affordable Care Act define an individuals income to determine if they are eligible for Advance Premium (Subsidy) Tax Credit?

Important: The Marketplace application makes the final determination of your eligibility for savings. It uses details you provide to develop a figure called “modified adjusted gross income” (MAGI). MAGI is used to determine your eligibility for coverage savings. The method below helps you make only a rough estimate of MAGI. You can use this number whenever a tool on our site asks you to estimate your income for the year. You won’t use this estimate anywhere in the Marketplace application itself.

Remember that you find out your actual eligibility for programs only when you submit a Marketplace application.

How to make a ballpark estimate
Start with your adjusted gross income (AGI). You’ll find this on your most recent federal income tax return. For most people, AGI is very close to or identical to MAGI.

Where to find AGI on IRS tax forms:

Form 1040: Line 37
Form 1040 EZ: Line 4
Form 1040 A: Line 21
Make adjustments to estimate your modified adjusted gross income (MAGI). You may have to add or subtract items from your adjusted gross income to estimate your MAGI.

Add the following kinds of income, if you have any, to your AGI:
Tax-exempt foreign income
Tax-exempt Social Security benefits (including tier 1 railroad retirement benefits)
Tax-exempt interest
Don’t include any Supplemental Security Income (SSI)


To complete the application for Advance Premium (Subsidy) Tax Credit an individual has to project their annual total household Modified Adjusted Income a year in advance of the actual year in which they applied for the Advance Premium (Subsidy) Tax Credit.   So, what happens if your actual annual household Modified Adjusted Income does not match your project annual total household Modified Adjusted Income you included with your application for Advance Premium (Subsidy) Tax Credit under the Affordable Care Act?   If your income changes over the year, your Advance Premium (Subsidy) Tax Credit will be adjusted accordingly.   If your income increases, you will have to pay the difference at tax filing time.   It will be important to stay on top of any income changes so you have an idea of how much you will owe at tax time.   Example:  A family of four with income of 400% of the Federal Poverty Level ($97,200 or more).   Those with income exceeding four times the Federal Poverty Level would have to repay the entire $2,500 from Advanced Premium (Subsidy) Tax Credit


Premium (Subsidy) Tax Credits are advanceable as noted above.   The Advance tax credit allows a person to receive assistance at the time that they purchase health insurance rather than paying their premium out-of-pocket and waiting to be reimbursed when filing their annual income tax return.   The subsidy will be paid directly to the insurance company on behalf of the policyholder and the policyholder will pay the net difference between the standard premium of their Health Plan and the Advance Premium (Subsidy) Tax Credit.