Cross References

  • Rev. Proc. 2025-25
  • IRC §36B(b)(3)(A)(i)

The Premium Tax Credit (PTC) is a refundable credit designed to subsidize the cost of health insurance. The PTC amount is determined based on the percentage of household income the cost of premiums represents, ranging from 2% of household income for those below 133% of the federal poverty line to 9.5% of household income for those at 400% of the federal poverty line. Taxpayers with household income above 400% of the federal poverty line do not qualify for the PTC.

The PTC is only allowed for taxpayers who are eligible to purchase health insurance through a health insurance exchange and are not eligible to receive affordable employer health insurance coverage, or some other government subsidized coverage such as Medicare or Medicaid.

For example, a taxpayer with household income at 200% of the federal poverty line in 2020 qualified for the PTC to the extent that the cost of premiums (after being reduced by the amount of the credit) was equal to 6.49% of household income.

The American Rescue Plan Act of 2021 and the Inflation Reduction Act of 2022 included provisions that reduced the applicable percentages as follows:

Tax Year Beginning in: 2021 through 2025 Household income % of Initial % Final % federal poverty line: Up to 133% 0.00% 0.00% 133% up to 150% 0.00% 0.00% 150% up to 200% 0.00% 2.00% 200% up to 250% 2.00% 4.00% 250% up to 300% 4.00% 6.00% 300% up to 400% 6.00% 8.50% 400% and higher 8.50% 8.50%

Zero percent means the taxpayer pays 0% of his or her household income for premiums after receiving the PTC (the PTC covers the entire cost of health insurance). For 2021 through 2025, the law also allowed households with income at 400% or above the federal poverty line to receive a PTC so that the taxpayer pays no more than 8.5% of his or her household income for the cost of health insurance after receiving the PTC. These provisions expire for tax years after 2025.

Each year, the IRS provides inflation adjusted amounts for the applicable percentage table. For tax years beginning in calendar year 2026, the following percentages apply.

Tax Year Beginning in: 2026 Household income % of Initial % Final % federal poverty line: Up to 133% 2.10% 2.10% 133% up to 150% 3.14% 4.19% 150% up to 200% 4.19% 6.60% 200% up to 250% 6.60% 8.44% 250% up to 300% 8.44% 9.96% 300% up to 400% 9.96% 9.96% Above 400% No credit allowed

For plan years beginning in calendar year 2026, the required contribution percentage is 9.96% for purposes of determining whether an individual is eligible for affordable employer- sponsored minimum essential coverage. Thus, if the individual’s out of pocket cost of employer-sponsored health insurance coverage is less than 9.96% of his or her income, the coverage is considered affordable and the taxpayer does not qualify for the PTC.