Premium Tax Credits

Many Vermonters can get financial help to lower the cost of a health insurance plan through Vermont Health Connect (VHC). One type of financial help is called the premium tax credit.

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More financial help: The Inflation Reduction Act of 2022 extended increased subsidies (financial help) for higher income households for another three years. If you didn’t qualify for financial help in the past, you should look again. Use the Plan Comparison Tool to see how much help you could get. For example: You may qualify for lower costs if you are a household of one person with annual income up to $118,000. Or you may qualify if you have a household of four people with annual income up to $333,000. You can only get this financial help if you sign up through VHC.

Update on employer insurance and the "family glitch:” Starting in 2023, VHC uses new rules when deciding if an employer’s offer of health insurance is considered “affordable” for family members (spouses and dependents). Family members could qualify for financial help if VHC finds that the offer is not “affordable” under the new rules. This could lower the cost of a health plan for them through VHC.

Do you have an offer of employer insurance that extends to your family members? Check to see if it is adequate and affordable. You can use VHC’s affordability estimator tool.

What is the premium tax credit?

The premium tax credit is a federal tax subsidy. It lowers your health insurance premium (monthly cost) when you buy a plan through VHC.

The amount of the credit is based on:

what you expect your income will be, and
the number of people in your tax household.

Your tax household includes you, your spouse (if you file jointly) and any dependents. At the end of the year, the IRS will check your actual income and tax household size to see if you got too little or too much.

How does it work?

If you qualify for the Premium Tax Credit, you can choose to get it one of two ways:

1. During the year: You can get the Premium Tax Credit now by choosing to have all or part of your tax credit paid directly to your health insurance company to lower your premium (monthly cost). (When the Premium Tax Credit is paid to your health insurance company during the year, it is called “Advanced Premium Tax Credits” or “APTC.”)

In this situation, you would pay the amount that is leftover after your APTC is subtracted from the full monthly cost of your insurance plan.

Example: If the full premium (monthly cost) for your plan is $580 and your monthly APTC is $350, you will owe $230 each month to the insurance company.

Example: If the full premium (monthly cost) for your plan is $580 and you do not apply any of the premium tax credit, then you will pay the full cost of your insurance plan during the year. When you file taxes at the end of the year, the IRS will decide how much premium tax credit you should have gotten. The IRS will then reduce your tax liability (if you owe taxes) or give you the money.

2. At the end of the year: You can get the premium tax credit later in a lump sum when you file your federal income taxes at the end of the year.

Who can get the Premium Tax Credit?

To be eligible for the premium tax credit, you must:

Buy a health plan through VHC. You cannot get the credit if you buy a plan directly through the insurance company.
Have a household income that is more than 138% of the Federal Poverty Level (FPL). (See below.) If your household is 138% FPL or less, you may qualify for Medicaid.
Say that you will file federal taxes with an eligible tax filing status.

If you have an offer of “adequate” or “affordable” health insurance through your employer or a family member’s employer, you cannot get the premium tax credit. Read more about an employer's offer of insurance, below.

Note: Is your household income 138% FPL or less and you are not eligible for Medicaid because of your immigration status? You may qualify for the premium tax credit.

How much financial help can I get?

When you apply for health insurance, VHC will tell you if you qualify for the premium tax credit and how much you can get.

You can use VHC’s Plan Comparison Tool to estimate how much help you may be able to get.

Note: Domestic violence victims and abandoned spouses should not include their spouse in their household size or income when using the Plan Comparison Tool. We recommend that you call VHC at 1-855-899-9600 or work with an assister to apply for financial help.

What counts as income and who is in my household?

Household size for the plan year

VHC will ask you to estimate your tax household for the plan year. Your tax household will be you, your spouse (if you have one) and any tax dependents.

Example: When you enroll in a health plan for 2024, you will tell VHC what you think your tax household will be when you file taxes at the end of the year for 2024.

Income

VHC uses MAGI (Modified Adjusted Gross Income) to decide if you qualify for the premium tax credit. MAGI is your Adjusted Gross Income (AGI) from your federal tax return, plus foreign income, plus tax exempt interest, plus non-taxable Social Security benefits. For most people, MAGI is the same as AGI. You can find it on your federal tax return on line 8b of Form 1040.

What is my household’s Federal Poverty Level (FPL)?

The Federal Poverty Level (FPL) is based on income and household size. It is updated every year. VHC will use the 2023 FPL guidelines from January through March 2024 (see the chart below). In April 2024, VHC will begin to use the 2024 FPL guidelines for the rest of the year.

You could qualify for financial help to lower the cost of a health plan through VHC if the income for your household size is 138% of the FPL or higher. You must also meet the other program rules.

If your income is lower than 138% FPL, you may qualify for Medicaid.

Federal Poverty Guidelines for 2023
Annual Income

Persons in Family	138%
1	$20,120.40
2	$27,213.60
3	$34,306.80
4	$41,400.00
5	$48,493.20
6	$55,586.40
7	$62,679.60
8	$69,772.80

Do I need to file taxes to be eligible for the tax credit?

Yes. To be eligible for the premium tax credit:

You must plan to file federal income taxes for the plan year. It is OK if you did not file a federal income tax return in the past, but you must plan to file in the future.

Example: You did not file taxes for 2023. You want to buy a health plan through VHC for 2024. On your application, you can say that you plan to file federal taxes for 2024. At the end of the year, you must file federal taxes for 2024.

You must file taxes with an eligible tax status.

If you are married: You must file federal income taxes as Married Filing Jointly or Head of Household (if appropriate). Note: You cannot qualify for premium tax credits if your tax filing status is Married Filing Separately, unless you are a victim of domestic violence or you are an abandoned spouse.*
If you are single: Your tax filing status does not impact your eligibility for the premium tax credit.

*Abandoned spouse means that you are married, but you don’t know where your spouse is.

*Victims of domestic violence means domestic abuse under the IRS rules. This includes physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate, or to undermine the victim’s ability to reason independently. The IRS considers all facts and circumstances in determining whether an individual is abused.

Can my family and I get the premium tax credit if my employer offers health insurance?

It depends on whether the offer is “adequate” and “affordable.”

Adequate

If your employer offers health insurance that is not considered “adequate” then you and your family members may be able to get financial help through VHC.

A health plan is “adequate” if it has an “actuarial value” of at least 60%. Ask your employer if their plan meets this test.

Affordable

If your employer offers health insurance that is not considered “affordable” then you and your family members may be able to get financial help through VHC.

Starting in 2023, there are two affordability tests – one for you and another for your family members. This is how it works:

For you: A health plan is “affordable” if a plan covering only the employee costs 9.12% or less of your total household income. This test does not consider the cost to cover anyone else in the family, even if they need insurance.
For your family members: A health plan is “affordable” for your family members if the plan covering your family members costs 9.12% or less of your total household income.

An employer may offer health insurance that is considered “affordable” for you (the employee) but is not considered “affordable” for your family members. In this situation, you would not be eligible for the premium tax credit, but your family members could be eligible as long as they meet the other program requirements.

Use VHC’s Affordability Estimator to figure out if your health plan from work is affordable.

Are there special rules for young adults under age 26?

Yes. The Affordable Care Act has special rules for young adults under age 26. If you are under the age of 26 and applying for health insurance through Vermont Health Connect (VHC) and…

Your parents claim you as a dependent on their taxes:

VHC will use your parents’ income to decide if you are eligible for Medicaid.
If you do not qualify for Medicaid based on income, your parents can add you to their health plan through VHC.
Your parents can get financial help to add you to their plan through VHC if:
- You do not have an offer of “adequate” or “affordable” health insurance through your employer,
- Your parents qualify based on their household income, and
- Your parents meet the other eligibility rules.
You can buy an individual health plan through VHC, but you will not be eligible for financial help.

Your parents do not claim you as a dependent on their taxes:

VHC will not use your parents’ income to decide if you are eligible for Medicaid.
If you do not qualify for Medicaid, you can either:
1. Get on your parents’ VHC health plan, or
2. Buy an individual health plan through VHC.
Whether you get on your parents’ VHC health plan or get your own plan, you can get financial help to lower the cost of your premium (monthly cost) through VHC if:
- You do not have an offer of “adequate” or “affordable” health insurance through your employer,
- You qualify based on your household income, and
- You meet the other eligibility rules.
VHC will not use your parents’ income to decide if you qualify for financial help.

What happens if I get too much premium tax credit during the year?

The IRS may ask you to pay back some of the financial help that you got from VHC. Read more about this on our Health Insurance, Taxes and You page.