Premium Tax Credit Eligibility Flow Chart for Individuals Over 25 Years of Age

Premium Tax Credit Eligibility Flow Chart for Individuals Over 25 Years of Age (Print Friendly)

Over 25 Sized Properly

Is your household income between 100 and 400 percent of the federal poverty line?

Technically, a taxpayer could be eligible for a premium tax credit if the taxpayer’s household income is equal to or exceeds 100 percent of the federal poverty line, but does not exceed 400 percent of the federal poverty line.

Household income is defined as the modified adjusted gross income of a person plus any amount excluded from gross income under §911 (i.e. foreign income) plus any amount of interest received or accrued that is exempt from tax.  Few individuals applying for a premium tax credit will have income under §911 or interest received or accrued that is exempt from tax.  Therefore, the most important part of modified adjusted gross income to understand is how adjusted gross income is calculated.  To calculate an individual’s adjusted gross income the sum of the individual’s gross income is calculated following the rules of §61 then certain items listed in §62 are deducted.  Among other items, adjusted gross income includes wages and tips, taxable distributions from pensions and IRAs, Social Security benefits, unemployment compensation, and alimony.  Among other items, adjusted gross income does not include pension and profit sharing contributions (i.e. 401(k) contributions), student loan interest deductions, health savings account deductions, and alimony paid.  For an exhaustive list of items included and not included in adjusted gross income review §61 and §62 of the Internal Revenue Code.

If a taxpayer is married or has dependents who the taxpayer is taking a deduction for under §151, the income of those individuals are aggregated together in determining the taxpayer’s household income.  The number of individuals included in a taxpayer’s household income will also be the number of individuals used when determining the taxpayer’s federal poverty line.  For example, if a taxpayer has a spouse and two children and the taxpayer is taking a §151 deduction for the spouse and the two children, the taxpayer’s household income will include the modified adjusted gross income of all four individuals.  And, the federal poverty line for four individuals will be used when determining whether the family’s household income falls within the federal poverty line threshold.

The following chart represents 100 and 400 percent of the federal poverty line for the different household sizes in the continental United States:

FPL - 8

There is an exception to the federal poverty line threshold for a taxpayer who has a household income of less than 100 percent of the federal poverty line.  The exception applies if the taxpayer is not eligible for Medicaid so long as the reason the taxpayer is not eligible is the taxpayer is an alien lawfully present in the United States.  If the taxpayer falls under this exception, the taxpayer’s household income will be equal to 100 percent of the federal poverty line when calculating the value of the taxpayer’s premium tax credit.

Are you eligible for Medicare? 

Medicare is a federal government program that provides health coverage to individuals 65 and older.  Medicare also covers individuals with certain disabilities and end stage renal disease (kidney failure).  The ACA makes it clear the mere eligibility for a program such as Medicare makes an individual ineligible for a premium tax credit.

Are you eligible for Medicaid? 

Medicaid is a State run program that provides health coverage to individuals with a low income.  States have the ability to expand Medicaid to individuals earning less than 138 percent of the federal poverty line.  As of this date 25 States plus the District of Columbia have accepted Medicaid expansion and 25 States have not accepted Medicaid expansion.  Each State’s Medicaid laws are unique so the laws of your State will need to be reviewed to determine Medicaid eligibility.  The ACA makes it clear the mere eligibility for a program such as Medicaid makes an individual ineligible for a premium tax credit.

State - Medicaid

Are you eligible for a government plan such as TRICARE?

If you are eligible for a government health plan such as TRICARE, the health coverage provided to United States military personnel and their dependents, you will not be eligible for a premium tax credit.  Other examples of government plans an individual could be eligible for that would disqualify the individual from being eligible for a premium tax credit include, but are not limited to, a veterans’ plan other than TRICARE or a health plan established for Peace Corps volunteers.  The ACA makes it clear the mere eligibility for a government plan makes an individual ineligible for a premium tax credit.

Are you eligible for an employer sponsored plan that is affordable and provides minimum value?

Your employer’s coverage is considered affordable if the cost of your share of premiums for self-only coverage does not exceed 9.5 percent of your household income.  Your employer’s coverage provides minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is at least 60 percent.  If your employer offers one plan which you are eligible for that meets these requirements, you will not be eligible for a premium tax credit.

Are you eligible for your spouse’s employer sponsored plan that is affordable and provides minimum value?

There is a separate box in the flow chart for your spouse’s plan because the affordability rules are different.  For your spouse’s plan the coverage will be deemed affordable if the cost of your spouse’s share of premiums for self-only coverage does not exceed 9.5 percent of your household income.  The affordability of your spouse’s plan is tied to the cost of your spouse’s share of premiums for self-only coverage, not the cost of the premiums to cover you.  It should be noted an employer can comply with the Play or Pay Mandate and not offer spousal coverage.  So it is possible your spouse’s plan will just cover your spouse and your spouse’s dependents.  Your spouse’s coverage provides minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is at least 60 percent.  If your spouse’s employer offers one plan which you are eligible for that meets these requirements, you will not be eligible for a premium tax credit.

Eligible for a premium tax credit

To be eligible for the premium tax credit an individual must enroll in a State Exchange.  As of the date of this publication, it does not matter if the Exchange is being run by the State, the Federal government, or as a partnership Exchange.  There are a few additional rules that could disqualify an individual from being eligible for a premium tax credit such as individuals who are incarcerated or who are illegally present in the United States are not eligible for a premium tax credit.  However, this flow chart should give a majority of Americans an accurate answer as to whether they are eligible for a premium tax credit.


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