Premium Tax Credit
A premium is simply the cost of insurance for a defined period. In the case of health insurance, the premium is usually paid on a monthly basis. (Car insurance premiums are usually paid twice a year or every six months.)
Under the ACA, if the cost of your health insurance purchased in the health insurance marketplace (federal or state) is too high for the income you earn, part of your monthly premium will be covered by a premium tax credit. The premium tax credit will be sent from the federal government directly to the company that provides your insurance coverage. You could opt to pay the full cost of your monthly premium each month and receive the premium tax credit as a refund when you file your federal tax return. The 2014 tax year was the first year a premium tax credit was available.
Note that only insurance purchased in the federal or state health insurance marketplaces (also called exchanges) will be eligible for the premium tax credit. More details about the premium tax credit can be found here (See links to more information on the web)
Health Reform: Beyond the Basics
Premium Tax Credits: Answers to Frequently Asked Questions provides answers to commonly asked questions about premium tax credits.
Premium Tax Credit Subsidy Calculator for Individuals and Families can be used to estimate the amount of the tax credit you may receive.
Want to learn more about the new health premium tax credit, see Consumer Reports' brochure on the topic.
TitlePremium Tax Credit
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