Info on Obamacare Tax Subsidies

By June 2, 2015 Uncategorized No Comments

The Tax Subsidy is financial support offered on behalf of the federal government to individuals and businesses, with the goal of making healthcare more affordable. The Obamacare Tax Subsidy provides federal tax credits to offset healthcare cost. These tax credits are usually awarded to individuals and small businesses that fall within a certain income bracket. It provides an option to obtaining affordable healthcare, by reducing the cost of monthly healthcare premiums.

The premium tax credit is a refundable tax credit that can be advanced in whole or in a part and that was designed to help individuals and families with the cost of health insurance. For individuals who are eligible to receive health insurance through their state’s or the federal health insurance marketplace, those individuals are probably eligible for the Premium Tax Credit (PTC). The Marketplace offers a variety of health insurance options. The 2016 Health Insurance Rates will vary by geographic location.


To be eligible for the premium tax credit, individuals must meet the following requirements:

1) The individual must purchase health insurance through the Health Insurance Marketplace; and
2) The individual must not be eligible for insurance coverage through an employer or government administered plan;
3) The individual must fall within certain income limits;
4) The individual can not be married and filing a separate federal tax return, unless the individual is a victim of domestic violence and have met the requirements in Notice 2014-23.
5) The individual cannot be claimed as a dependent on someone else’s tax return.

Receiving the Credit

In order to qualify for the premium tax credit, you must purchase your health insurance through the Health Insurance Marketplace.  You can either apply for health insurance through your state’s or the federal health insurance marketplace on your own or you may enlist the help of a licensed insurance agent or broker who can help you fill out the application, review your options, understand the subsidies available to you and what that will mean for your wallet and enroll in health insurance  as well.

If you are eligible for the premium tax credit, you have the following options:

1) Get It Now. You can either have a portion or the entire amount of your tax credit paid in advance to your insurance provider, so your monthly premiums can be lowered; or

2) Get It Later. You can pay the full amount of the premiums every month and receive a credit at the end of the year when filing your tax return.

During open enrollment, the Health Insurance Exchange will provide you with an estimated amount of your premium tax credit in which you will be able to claim when filing your annual tax returns. It is also important to notify the Health Insurance Exchange of changes in income throughout the year, for receiving too little or too much can affect your refund balance when filing your tax return at the end of the year.

What are the Income Limits?

Individuals and families who generally fall within 100 percent and 400 percent of the federal poverty line are eligible to receive the premium tax credit. For individuals who either live in state that expanded the Medicaid requirements and make under 133% of the Federal Poverty Level or live in a state that did not expand the requirements and make under 100% of the Federal Poverty Level,  you must enroll in Medicaid and are unfortunately not eligible for a premium tax credit. If your income increases and you become eligible for a subsidy and ineligible for Medicaid, you have triggered a Qualifying Life Event that allows you to enroll in health insurance on the state or federal insurance marketplace during a Special Enrollment Period. During this time, even if it is after the open enrollment period, you can get a federal subsidy to help you pay for your healthcare costs.

Federal poverty guidelines change annually due to inflation and are calculated by the US.. Department of Health and Human Services. When calculating the premium tax credit, eligibility is based on poverty levels using the most current published poverty guidelines during open enrollment. For example, 2014 tax credits will be based on 2013 guidelines. The 2014 guidelines will be applied to 2015 Health Insurance Rates.

Claiming the Tax Credit When Filing Your Return

For any tax year that you receive an advance credit and payments, you are required to file a federal income tax return for that year. If you have chosen to receive your tax credit in advance, you will subtract the advance payments that were received during the year from the amount of the premium tax credit calculated when completing your tax return. If the advance credit exceeds the premium tax credit, the difference may result in a balance due or a decrease in your refund. If you have chosen to receive the credit when filing your annual tax return, it will either increase your refund or decrease any monies due.


Businesses with less than 25 full-time employees might be eligible for the Small Business Health Care Tax Credit. Small business owners were eligible for a maximum tax credit of 35% of premiums paid for 2010 through 2013 tax years. Beginning in 2014, there will be changes to the credit. The maximum credit will increase to 50% for employers and 35% for tax-exempt employers. An increase in 2015 Obamacare Rates may not be noticeable to small business owners due to an increase in tax credit.

To be eligible for a credit in the 2015 Obamacare Rates, the small employer must pay premiums to a qualified health plan through the Small Business Health Options Program (SHOP) or qualify for an exemption. The credit is offered to eligible employers for two consecutive years. Small business owners will claim the credit by filing form 8941.

References: How Does the Premium Tax Credit Work, Obamacare Subsidies


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