Premium Tax Credits

Your Household Size: To decide if you qualify for Premium Tax Credits, Vermont Health Connect uses your tax household as your household size. This means that your household consists of you, your spouse (if you have one), and any dependents.

Your Income: Vermont Health Connect uses MAGI (Modified Adjusted Gross Income) to decide if you qualify for Premium Tax Credits. 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 individuals, MAGI is the same as AGI. You can find it on your federal tax return on line 8b of Form 1040.

You may qualify for the Premium Tax Credit if your household income is between 138% and 400% of the Federal Poverty Level (FPL) for your household size.

For 2021 plans, the Premium Tax Credit is based on 2020 FPL guidelines.

To be eligible for the Premium Tax Credit, you must file federal income taxes.

If you are married and you want to be eligible for Premium Tax Credits, you must file your federal income taxes as Married Filing Jointly or Head of Household (if appropriate).

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

If you are single, your tax filing status does not impact your eligibility for Premium Tax Credits.

*Under the IRS rule, domestic abuse 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.

When you apply for health insurance through Vermont Health Connect, you will be told if you qualify for Premium Tax Credits and how much help you can get.

You can use the Vermont Health Connect Plan Comparison Tool right now to estimate how much help you may be able to get to pay your monthly insurance premiums.

Domestic violence victims and abandoned spouses:

• You should call Vermont Health Connect at 1-855-899-9600 or work with an assister to apply for financial assistance. 
• When using the Plan Comparison Tool, you should not include your spouse in your household or in your income.

If your insurance at work is considered “affordable” and “adequate” (see below for what these mean), you will not be eligible for financial help to pay for a plan on Vermont Health Connect. You will have to pay the full premium.

If your insurance at work is not considered affordable and adequate, you might be eligible for financial help that will lower your monthly premium. See “How Much Help Can You Get?” (above) for more information.

Is My Plan “Affordable” and “Adequate”?

• A health plan is “affordable” if a plan covering just the employee costs 9.83% or less of your total household income. This test does not consider the cost to cover anyone else in the family. Use this Affordability Estimator to figure out if your health plan from work is affordable.
• A health plan is “adequate” if it has an “actuarial value” of at least 60%. You can ask your employer if their plan meets this test.

You can tell Vermont Health Connect about your employer’s plan and they will tell you if you are eligible for financial help. Call Vermont Health Connect at 1-855-899-9600.

If you are under age 26 and your parents claim you as a dependent on their taxes, then: 

• Your parents can get financial help to add you to their health plan if they have a plan through Vermont Health Connect and are eligible based on their income.
• You can buy an individual plan on Vermont Health Connect, but you will not be eligible for financial help.
• Your parents’ income will be counted when Vermont Health Connect decides if you are eligible for Medicaid.

For more on young adult options for health insurance, see our Individuals and Families page.

If you qualify for Premium Tax Credits, you can choose to get the tax credit in one of two ways.

1. 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.

This would mean that you have to pay the full cost of your insurance plan during the year.

2. You can get the Premium Tax Credit now by choosing to have all or part of your tax credits paid directly to your health insurance company to lower your monthly premium. (When Premium Tax Credits are paid monthly to your health insurance company, they are called “Advanced Premium Tax Credits.”)

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

Example: If the full monthly premium for your plan is $580 and your Advanced Premium Tax Credit is $350, you will owe $230 each month.

2014-2018 Penalty

A penalty was in effect from 2014 through 2018 if you did not have health insurance. There is no penalty for the 2019 tax year or later tax years. That means if you did not have health insurance starting January 2019, you do not have a tax penalty. 

Paying Back Some of the Credit

The IRS may ask you to pay back some of the financial help that you got from Vermont Health Connect if one of the following is true:

1. You received too much Advance Premium Tax Credit (APTC).

During the year, Vermont Health Connect gives you financial assistance called an Advance Premium Tax Credit (APTC) each month to help pay your premium. It 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. When you file your tax return, you report your income and calculate your final Premium Tax Credit on your tax return. This is called “reconciliation.”

When you do your taxes, your income or tax household may be different than you expected. Or, you might not be eligible for the Premium Tax Credit for another reason. If you got too much APTC, you will have to pay back all or some of it when you file your taxes.

2. You received APTC in a month that you did not pay your premium.

If your plan closed for non-payment during the year, you will have to pay back the APTC on your taxes for your last month of coverage.

You can avoid paying back this APTC if you pay Vermont Health Connect the premium that you owe before the tax filing deadline. To do this, you ask Vermont Health Connect to issue a new tax Form 1095-A.

Example: Bob started on a Vermont Health Connect plan on January 1. He received $200 a month in APTC to help pay for the plan. His monthly bill was $300. Bob, however, did not pay his $300 bill for May coverage. Ultimately, his plan was terminated for non-payment on May 31^st.

Bob needs to pay the $300 monthly bill before the tax filing deadline. 

If he does not make the $300 payment before the tax filing deadline, he will still owe the $300 to his insurance company AND he will have to pay the $200 that he received in APTC that month back to the IRS.

You should not have to pay back more than one month of APTC if your plan closed for non-payment. If your Form 1095-A shows more than one month with APTC and no premium (see the image), please contact us at the Office of the Health Care Advocate.

Go to our Health Insurance, Taxes and You web page to find out more about these important tax issues.

This can get complicated. If you have questions, please contact us at the Office of the Health Care Advocate by filling in this form or calling 1-800-917-7787. There is no charge for our help.