Most people who buy a Marketplace plan get help paying for it. That help is called a premium tax credit. Here is how it works in plain terms.
What the credit does
The credit lowers the monthly premium of a Marketplace plan. You can take it:
- In advance, applied to each month's bill (what most people do), or
- At tax time, as a credit on your federal return.
Because the advance credit is based on an estimate of your income, the IRS reconciles it when you file taxes. If you earned more than estimated, you may owe some back; if you earned less, you may get more.
Who qualifies
Eligibility depends mainly on:
- Household size — everyone on your tax return
- Estimated household income for the coverage year
- Access to other coverage — if you are offered affordable employer coverage or are eligible for Medicare or Medicaid, you generally do not qualify
The amount of help is on a sliding scale: lower income, larger credit.
Cost-sharing reductions
Households in certain income ranges who choose a Silver plan may also qualify for cost-sharing reductions, which lower deductibles and copays. This is why an agent sometimes recommends Silver even when another plan looks cheaper on the surface.
Getting the estimate right
Your estimate is an honest best guess at next year's income, not last year's number. Include wages, self-employment income, Social Security benefits and most other taxable income for everyone in the household.
If your income or household changes during the year, report it. A new job, a raise, a marriage or a baby can change your credit. Reporting promptly avoids a surprise at tax time.
How an agent helps
A licensed Enroll America agent runs the estimate with you on the phone, explains what the credit does to your monthly premium, and flags whether a Silver plan with cost-sharing reductions would save you more. There is no charge, and the plan price is the same whether you enroll with an agent or on your own. Call (877) 479-6279, in English or Spanish.
Enroll America Inc is an independent licensed health insurance agency and is not affiliated with a government agency. This guide is general information, not tax advice. Source: HealthCare.gov, IRS.
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