Premium Tax Credit (PTC)

About This Program

The Premium Tax Credit (PTC) is a refundable federal tax credit that subsidizes the cost of health insurance purchased through the ACA Marketplace. Most people take the credit in advance as monthly payments applied directly to their premium — this is called Advance Premium Tax Credit (APTC) and reduces what you pay each month rather than waiting for a tax refund. Others prefer to pay full premiums and claim the entire credit on their tax return. The credit is calculated based on your projected household income and the cost of the benchmark silver plan in your area. It is designed to cap the percentage of your income you spend on the benchmark plan at a sliding scale from 0-8.5% of household income, depending on your income relative to the federal poverty level. Enhanced credits introduced in 2021 and extended through 2025 make the benchmark plan free or nearly free for people below 150% FPL. If your actual income at year-end differs from your projected income, you reconcile the difference on your tax return using Form 8962. If you earned more than projected, you may owe back some of the advance credit (repayment is capped for lower incomes). If you earned less, you receive a larger credit. This reconciliation process means that significant life changes — job loss, new income, marriage, divorce, having a child — should be reported to your Marketplace promptly so your advance credit amount is adjusted. The PTC is only available for coverage purchased through Healthcare.gov or a state-based Marketplace. You cannot claim it for employer-sponsored insurance, even if that coverage is expensive relative to your income.

Eligibility Requirements

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