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Affordable Healthcare Act: Tax Credits to Offset Insurance Premiums

A Kaiser Family Foundation study predicts that nearly half of all Americans who buy their own health insurance through the Affordable Care Act's Marketplaces will be eligible for tax credits or subsidies. Researchers estimate tax credits averaging $2,672 for individuals will cover approximately 32% of the insurance cost, and tax credits averaging $5,548 will cover 66% of the cost for families.

The federal tax credits will be available for people who have incomes from 100% up to 400% of the poverty level (between $11,500 and $46,000 for a single person, and about $24,000 to $94,000 per year for a family of four in 2014). The tax credit will be refundable so taxpayers who have little or no income tax liability can still benefit, or the credit can be paid in advance to the taxpayer’s insurance company to help cover the cost of premiums.

The amount of the tax credit used in the study is based on a benchmark premium, which is the cost of the second-lowest-cost silver plan in the area where a person lives. The tax credit equals that benchmark premium minus what the individual is expected to pay based on their family income (which is calculated on a sliding scale from 2% to 9.5% of income). Researchers cautioned that it is difficult to determine exactly what Americans will be paying for coverage through the Marketplace because subsidy amounts will be based on factors including age, income, place of residence and type of policy chosen.

The new analysis comes as states begin to release information about the cost of insurance premiums purchased through the state exchanges or Marketplaces, starting in 2014.

Return to the Affordable Care Act of 2010 page.

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Any views expressed herein are based on our best information. The content of this web site was written as general information without specific individual information and thus may not apply in all situations. This material was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

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Janelle Ogg, EA
Richard Ogg, EA