Tax Credits - Do you Qualify?
Are you looking for help to pay your health insurance premium? Do you qualify for tax credits? Sometimes it can be hard to figure out, so here are some guidelines.
In general, there are two benchmarks you must meet in order to receive tax credits.
Is your household income less than 400% of the Federal Poverty Level?
Does a Silver plan insurance premium cost more than 10% of your monthly gross income?
The answer to both of these questions must be yes in order to get tax credits.
Here's a bit more detail:
Tax credits utilize the the Federal Poverty Level. If your household income is less than 400% of the FPL, you may qualify for tax credits to lower the cost of your health insurance premium. So what are the 2017 limits?
Household of 1: $48,240
Household of 2: $64,960
Household of 3: $81,680
Household of 4: $98,400
Washington state did expand Medicaid, so if your household income is less than 138% of the FPL you will be eligible for Medicaid, or Apple Health as it is called.
So if your income is less than 400% of the FPL you will get a tax credit, right? Not necessarily so. In addition to qualifying via income, your benchmark premium must be considered unaffordable. (This may not be the plan you purchase, but the system has to pick one to use.) Just to keep things simple, I use the 10% test. If your that premium is more than 10% of your monthly gross income, then it is deemed unaffordable. In reality, there is a bit of a sliding scale for very low incomes, but the highest percentage comparison is 9.69% - rounding to 10% keeps things simple.
Joe is 30 years old, and makes $3000 per month. Assume the benchmark premium for him is $250 per month. Joe will not get a tax credit. His income qualifies him for a tax credit, but the premium is less than $300 per month and is considered affordable.
Mary is 60 years old, and makes $5000 per month. Assume the benchmark premium for her is $540 per month. Mary will not get a tax credit. Although her premium is more than 10% of her monthly income, she makes more than 400% of the FPL and does not qualify for tax credits.
Betty is 60 years old, and makes $3000 per month. Like Mary, assume her benchmark premium is $540 per month. Betty will get a tax credit to help pay for her premium. Her income and premium both meet the criteria. Betty will receive roughly $240 per month to help pay for her health insurance. She can use the credit on the benchmark plan, or any other plan that she is eligible to purchase on the Exchange.
Do you have specific questions on Tax Credits or want help with your particular situation? Give us a call or send us an email - we can help you decipher what's going on.