What is the Health Insurance Premium Tax Credit?

Individual and Family

What is the Health Insurance Premium Tax Credit?

Published on January 10, 2018


What is a health insurance premium?

Before we learn about the health insurance premium credit, let’s define what a health insurance premium is.
A health insurance premium is the monthly cost you pay to have health insurance. This is the set price you pay for your family’s, or just your own health insurance every month. It does not include other health insurance costs such as copayments and deductibles.
Keep in mind that the premium is a cost you continue to pay after you have met your out-of-pocket maximum.
If you are planning on insuring yourself, and an employer isn’t paying a percentage of the cost of your health insurance premium, it might feel like a huge expense to deal with every month. But before getting discouraged by health insurance premium costs, it may be worth your time to look into whether or not you qualify for the health insurance premium tax credit.

Health insurance premium tax credit

The good news about purchasing health insurance for yourself and your family is that you could qualify for a tax credit to apply to your monthly premium. This health insurance premium tax credit can help lower the cost of being insured by giving you a refundable credit after you file a tax return. In some cases, you may even be able to get the credit in advanced payments to help throughout the year.
You will need to qualify as an eligible individual before getting this credit. Read on to see some of the qualifications you must meet in order to benefit from this tax credit.
The amount of the health insurance premium tax credit depends on household income, and qualifying for this credit depends on a few requirements being met. Some of these requirements include:

  • Not being a dependent on someone else’s taxes
  • Having a household income within a defined range (must be at least 100%, but no more than 400%, of the poverty range for your family’s size)
  • Not filing as “Married Filing Separately” on your tax return
  • Having health insurance for which you pay a monthly premium
  • Not being eligible for certain government-sponsored health-care programs
  • Not having affordable coverage through an employee-sponsored plan

The credit is offered on a sliding scale—greater credit amounts are available to those with lower household incomes. There may be exceptions to these requirements, and there are more details about qualifying for the premium tax credit which you can read about here.
This article is only for general information and is not tax or legal advice. Consult your tax or legal advisor for guidance.

Why you should care about the health insurance premium tax credit

The health insurance premium tax credit could essentially be giving you back money to help pay for your monthly health insurance premium—in a way, you can think of it as a substitute for the percentage that an employer would be paying with an employer-sponsored health insurance plan.
Navigating the process of finding insurance yourself can be difficult, but knowing about opportunities like the tax credit makes it easier to save money on individual and family health insurance. Go to eHealth.com for more resources and tools that can help you save on buying individual insurance.
For more detailed answers about the premium tax credit visit the Q and A page on irs.gov.

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