Tax Credit for Health Insurance 2024

You can get tax credit to lower your health insurance cost, especially if you fall under the federal poverty line. Tax credit for health insurance is designed to assist low-income earners who may find it difficult to access health insurance due to lack of money. Although high-income earners can still access health insurance tax credit, they will refund it in full when filing for tax return.

The amount of tax credit that you can receive for your health insurance is dependent on several factors, like your estimated income, household information, and the cost of Marketplace health plans in your region.

However, to qualify for health insurance tax credit, you are required to meet certain criteria, like being a U.S. citizen, having an income estimation within the federal poverty range, etc. Once you meet these requirements, you can apply for tax credit for health insurance by visiting the health insurance marketplace website and completing the application form.

What is a tax credit?

Tax credit is a financial benefit you receive when you meet a certain requirement. It can be applied in different areas depending on what you want to use it for.

Relating it to insurance, a tax credit for health insurance is a financial benefit that you can use to reduce your monthly health insurance payment when you purchase an insurance plan via the Health Insurance Marketplace. It is also called a premium tax credit. 

Your tax credit is often determined based on the information you provided on your health insurance marketplace application, like your income estimate, household information, Marketplace health plans cost  in your region, etc.

How Does Tax Credit for Health Insurance Work?

How tax credit for health insurance works is that the health insurance marketplace will determine the exact amount of money that will be enough to cover your health insurance premium using the established benchmark, which is usually a silver insurance plan. Once they determine the expected contribution, they will use a sliding scale based on your 2025 income to decide your tax credit. 

However, there is always more tax credit (financial assistance) for enrollees who have lower income than those with higher income. This means that policyholders who are at the bottom of the federal poverty line will receive a higher tax credit, and the amount that they will refund at due time will also be small. 

For the 2025 tax credit, if your proposed annual income for the year is between $15,060 and $22,590 (i.e., representing 100%-150% Federal poverty level FPL for an unmarried adult), you won’t pay anything for the benchmark silver plan. Meanwhile, if your expected yearly income for 2025 is up to $60,240 or higher (i.e., representing 400% FPL for a single adult), you will need to pay 8.5% of your total  income for the benchmark silver plan

You can claim your tax credit at the end of the year, or, better yet, you can request an upfront tax credit depending on your estimated income for the year ahead. However, if you choose to get an advanced credit, the government will then pay the tax credit on a monthly basis to your insurance company, while your insurer will charge you for the remaining health insurance premium. You can calculate your tax credit by substracting your premium for the benchmark plan from your expected contribution. This means that you won’t pay more than the actual premium for the insurance plan.

Finally, if you don’t really know your exact income for the proposed coverage year when you are applying, you would need to provide your best estimation. Later on, the Internal Revenue Service (IRS) will compare your real income to the exact amount of tax credit you claimed upfront when you file your tax return. If the IRS finds out that your income estimate was low and you claimed more premium tax credit, you will be required to repay the difference. On the other hand, if you didn’t get all the tax credit that you were entitled to within the year, you can claim the remaining amount when you file your tax return.

Requirements for Health Insurance Tax Credit

To get health insurance tax credit, there are eligibility criteria that you must meet. They include: 

• You must be a U.S. citizen or a lawful permanent resident.
• Your household income for the proposed coverage year must be at least 100% but not greater than 400% of the federal poverty line
• You must not have employment-based health insurance coverage
• You mustn’t be eligible for public health insurance coverage, like Medicaid and their likes. 

How to Apply for Tax Credit for Health Insurance

If you’ve gone through the requirements in the above section and you are qualified for the health insurance tax credit, you can start your application by following the steps below:

• Visit the health insurance marketplace official website at HealthCare.gov. Or you can apply through mail, in person or via phone
• Click on the green tab with the inscription “Apply for coverage.”
• Now provide all the necessary information about your income, immigration status, number of people in your household, Social Security number, etc. 
• Review your application to see if your details are correct. If they are, you can proceed by submitting it.
• Finally, ACA Marketplace will review your application and determine whether you are eligible or not. If you are not eligible, they may refer you to other programs.

How to Calculate Health Insurance Tax Credit 

You can calculate your tax credit for health insurance by subtracting your maximum monthly contribution from the second lowest-cost health insurance silver plan (for your age, county of residence, and family size) that is available on the Marketplace. If you don’t know your second-lowest cost silver (SLCS) plan rates for your county, you can visit healthcare.gov to get it. Alternatively, you can also calculate your health insurance tax credit by visiting this site tax credit calculator. 

Is a tax credit for health insurance refundable?

Yes, health insurance tax credit is refundable, but the amount that you will payback is dependent on the percentage of your income when compared with the federal poverty range. For single taxpayers whose percentage of their poverty line is below 200%, they will pay back $375, while others under the same range will repay $750.

For those whose poverty line is between 200% and less 300%, they will pay $950 and $1,900 for single taxpayers and others, respectively.

Meanwhile, if your federal poverty range is between 300% and less than 400%, the amount of tax credit that you will repay back is $1,575 as a single taxpayer, while others will refund $3,150.

However, if your income is above 400% when measured with the federal poverty line, you are required to refund the tax credit in full, whether you are a single taxpayer or belong to other groups. 

Conclusion

While the health insurance tax credit helps you to lower your health insurance payment, there are different requirements that you must meet to access it. And the amount of tax credit that you will receive is dependent on several factors. The application process is not difficult, but even if you access the tax credit, you are required to refund part or all the money depending on your income percentage when compared to the federal poverty line.