The Affordable Care Act, also known as Obamacare, was intended to help reduce the cost of healthcare for the average American. Whether it does this in the long term remains to be seen, but in the short term, it has added a lot of confusing regulations to the health care sector. One of these regulations regards tax credits or deductions and health insurance premiums.
Many people are under the impression that health insurance premiums are tax deductible. This is not exactly true, although it is close. There is a tax credit available for those who have too much income to qualify for Medicaid but still need a little help. However, a tax credit is not the same thing as a tax deduction.
Enter your zip code now to find affordable healthcare coverage and avoid the tax penalty!
How You Can Get Health Insurance Premium Tax Credits
Tax credits are available to people with moderate income who have purchased a plan through their state’s health insurance marketplace. The Affordable Care Act has made it very convenient to claim this tax credit in advance and have it apply to your monthly premiums right away. If you prefer, you can pay the premium at the full amount per month and get the full tax credit when you file your return.
If you prefer, you can pay the premium at the full amount per month and get the full tax credit when you file your return.
How do I know if I’m eligible for a tax credit, and, if so, how much can I get?
You should be able to see whether or not you can get a tax credit when you are buying your plan on the health insurance marketplace. When you see whether or not you are eligible for a credit, you should be able to see how much you can get at the same time. The amount varies based on your family size and income.
Eligibility for a Tax Credit
There is a certain range of income that you and your family must fall into in order to get a tax credit. If your family is just you, you must make between $11,880 and $47,520.
Note that all categories have a minimum income limit. This is because people below this limit qualify for Medicaid or Medicare and will not be buying a private insurance policy through the marketplace. Obviously, this means that they will not need a tax credit for their policy.
The minimum income limit for a two-person family is $16,020, while the maximum income is $64,080. If your family is composed of three people, the minimum limit is $20.160 and the upper limit is $80,640. If your family has four people in it, the lower limit is $24,300 and the maximum income level is $97,200.
How Much the Tax Credit is Worth
The tax credit amount depends on your family’s income. The full amount is only available to families on the low end of the income spectrum. It decreases as the income level rises, and is relatively insignificant by the time the income is at the top level.
The credit’s value changes annually. It is important to note that the amount of the tax credit is slightly different in Alaska and Hawaii.
Can I get the tax credit if I have insurance from an employer?
The short answer is: probably not. Most people who have insurance through their jobs won’t be using a state marketplace. Keep in mind that state marketplaces are the only way that policies which qualify for tax credits can be purchased.
You also need to keep in mind the fact that if you choose to purchase a policy through a state marketplace despite an affordable policy being offered by your employer, you are not eligible for the tax credit. The tax credit is designed for people who need a little help, and who cannot get a health insurance policy for themselves and their families any way besides the state government-run marketplaces.
Ways That People with Employer-offered Health Insurance Can Get the Credit
There are some exceptions to the general rule that people with health insurance options through their jobs can’t get the tax credit. If the insurance that the employer offers is more than 9.6 percent of your annual income or covers less than 60 percent 0f your average health care costs, you can get the tax credit if your income falls within the previously mentioned levels.
Find health insurance today. Use our free search tool to get matched up with the best providers in your state.