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How the Affordable Care Act Tax Credit Works

        Money | Taxes

Who Qualifies for the ACA Tax Credit?
Hisham Uadadeh enrolls in a health insurance plan under the Affordable Care Act with the help of A. Michael Khoury at Leading Insurance Agency  in Miami.
Hisham Uadadeh enrolls in a health insurance plan under the Affordable Care Act with the help of A. Michael Khoury at Leading Insurance Agency in Miami.
Joe Raedle/Getty Images

To be eligible for the premium tax credit, you have to meet certain criteria. To start off, your income must be between 100 percent and 400 percent of the federal poverty line. For a person filing individually in 2015 (for tax year 2014), this means between $11,670 and $46,680. For a family of four, it's between $23,850 and $95,400 [sources: CBPP, HSS]. (Income qualifications are higher for Alaska and Hawaii.) You must also be a U.S. citizen or a legal immigrant.

In most states, Medicaid covers you if you fall below the poverty line, so you wouldn't be eligible for coverage under the Affordable Care Act. Legal immigrants who live below the poverty line also qualify for Medicaid, but sometimes there's a five-year waiting period for coverage. Those who are on the wait list can apply for ACA marketplace insurance and the tax credit during that period.

There is one hitch with the income qualification guidelines. When the Supreme Court upheld the ACA in 2012, there was a provision for states to choose whether they'd like to expand Medicaid to include those who make up to 133 percent of the poverty line. Some states took this option, and some didn't. This means that if you live in a state that expanded Medicaid, you do qualify for ACA coverage (and thus the tax credit) only if you make between 133 percent and 400 percent of the poverty level (133 percent equals $15,521 for an individual and $31,720 for a family of four). If you make between 100 and 133 percent of the line, you must take the Medicaid option. If your state decided to keep Medicaid as-is, the minimum qualifying income for the tax credit remains at 100 percent of the poverty line [source: CBPP].

Employer insurance is also a factor. If your employer offers health insurance that is deemed "affordable and adequate," you cannot apply for ACA marketplace coverage and the tax credit. "Affordable" means that the annual premium does not add up to more than 9.5 percent of your yearly income. To be considered adequate, the employer health plan must offer coverage equal to that of a bronze plan on the ACA marketplace. (We'll explain the plan categories on the next page.) If the insurance offered by your employer fits the bill on both counts, you must sign up for that coverage instead of an ACA marketplace plan.

You also have to file your taxes as an individual or jointly with your spouse. If you're a legal dependent or are married but file separately, you don't qualify for the tax credit. There are provisions for victims of domestic abuse who are still married but are not filing jointly.

So, once you've figured out that you qualify, how do you go about actually getting that credit and picking a plan?


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