Individuals who purchase health insurance through a federal or state health insurance exchange may be eligible for a new, refundable tax credit that will be available in 2014.

The Premium Assistance Tax Credit is a federal subsidy for people whose income is up to four times the federal poverty line. The Premium Assistance Tax Credit helps people afford health insurance purchased on the individual market through a health insurance exchange.

Criteria and Eligibility
A person is eligible for the premium assistance tax credit if he or she meets five criteria:

1. Is enrolled in at least one health plan purchased through a health insurance exchange,
2. Is not eligible for minimum essential coverage through a government- or employer-sponsored health plan,
3. Has household income up to 400% of the federal poverty line based on the person's family size,
4. If married, the spouses must file a joint return (married filing separately is not eligible for the credit), and
5. Is a United States citizen, national or a resident alien lawfully present in the U.S.

What These Words Mean

A health plan must be purchased through a health insurance exchange to qualify for the premium tax credit. Health plans obtained through a group plan at work don't qualify for this tax credit.

A health insurance exchange is any of the insurance marketplaces set up by federal or state agencies, such as the federal exchange at Healthcare.gov. (Currently, there are two court cases involving the issue of whether buying health insurance through the federal exchange will actually qualify someone for the premium tax credit.

One court has said yes, but another court has said no. The issue is in the original language of the Affordable Care Act, premium tax credits are only supposed to go to people who purchase insurance through an exchange set up by the state. We are waiting to see how this issue will resolve. For details, seeSplit Among Circuits over Premium Tax Credit.)

Minimum essential coverage means health insurance provided through a group health plan at work or any number of government-run health plans such as Medicare.

Household income means income for each person in the family who is required to file a tax return. Income, for the purpose of the premium tax credit, is a person's total income minus any adjustments to income plus any tax-exempt interest, the tax-exempt portion of Social Security benefits, and any excluded foreign earned income.

Family size means the number of people in a family. This is determined by the number of individuals for whom the taxpayer is allowed a personal exemption.

Federal Poverty Line used to Determine Eligibility for the Premium Assistance Tax Credit in 2014

For the 48 Contiguous States and the District of Columbia
Persons in family/ household	Poverty guideline (100%)	Poverty guideline (400%)
1	$11,490	$45,960
2	$15,510	$62,040
3	$19,530	$78,120
4	$23,550	$94,200
5	$27,570	$110,280
6	$31,590	$126,360
7	$35,610	$142,440
8	$39,630	$158,520
for each additional person, add	$4,020	$16,080
For Alaska
1	$14,350	$57,400
2	$19,380	$77,520
3	$24,410	$97,640
4	$29,440	$117,760
5	$34,470	$137,880
6	$39,500	$158,000
7	$44,530	$178,120
8	$49,560	$198,240
for each additional person, add	$5,030	$20,120
For Hawaii
1	$13,230	$52,920
2	$17,850	$71,400
3	$22,470	$89,880
4	$27,090	$108,360
5	$31,710	$126,840
6	$36,330	$145,320
7	$40,950	$163,800
8	$45,570	$182,280
for each additional person, add	$4,620	$18,480
Source: HHS.gov

 

Some additional points to consider about eligibility

• Dependents are not eligible for the premium assistance tax credit, however the person eligible to claim the dependent can take the credit based on premiums paid for the dependent's health insurance.
• Married persons who file separately are not eligible for the tax credit. However, the IRS allows victims of domestic abuse to be eligible for the tax credit even if they file separately. For details, see Notice 2014-23 on the IRS web site.
• Resident aliens who are not lawfully present in the US are not eligible for the tax credit.
• Incarcerated persons are not eligible for the tax credit.