Credit Amount
• The credit amount is generally equal to the difference between the premium for the “benchmark plan” and the taxpayer’s “expected contribution.”
• The expected contribution is a specified percentage of the taxpayer’s household income. The percentage increases as income increases, from 2% of income for families at 100% of the federal poverty level (FPL) to 9.5% of income for families at 400% of FPL. (The actual amount a family pays for coverage will be less than the expected contribution if the family chooses a plan that is less expensive than the benchmark plan.)
• The benchmark plan is the second-lowest-cost plan that would cover the family at the “silver” level of coverage.
• The credit is capped at the premium for the plan the family chooses (so no one receives a credit that is larger than the amount they actually pay for their plan).
Example 2: Family of Four with Income of $50,000, Purchases Less Expensive Plan
If a family chooses a plan that is less expensive than the benchmark plan, the family will generally pay less, thereby creating an incentive to choose a less costly plan and reducing overall health care costs.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,570
• Premium for Benchmark Plan: $9,000
• Premium Tax Credit: $5,430 ($9,000 - $3,570)
• Premium for Plan Family Chooses: $7,500
• Actual Family Contribution: $2,070 ($7,500 - $5,430)
