Premium Tax Credit
Definition
A refundable tax credit that helps eligible individuals and families afford health insurance purchased through the Health Insurance Marketplace. The credit is based on household income relative to the federal poverty level and the cost of the benchmark (second-lowest-cost silver) plan in your area. It can be taken in advance to lower monthly premiums or claimed when filing your tax return. You must reconcile advance payments on Form 8962. Income changes during the year can affect the final credit amount.
Example
Your household income is 200% of the federal poverty level. The benchmark silver plan costs $800/month but your expected contribution is $300/month. You receive a $500/month premium tax credit to cover the difference.
Related Terms
Your Adjusted Gross Income (AGI) with certain deductions added back in, such as ...
A tax credit that can reduce your tax liability below zero, resulting in a refun...
A dollar-for-dollar reduction in the amount of tax you owe, more valuable than a...