You may be eligible for Obamacare subsidies that could significantly reduce your health insurance premiums.
If you’re a low- or middle-income individual or family, you may be eligible to save money thanks to the Affordable Care Act (ACA) subsidies (also referred to as “Obamacare” subsidies or advanced premium tax credits). These government premium tax credits are designed to help you pay for health insurance coverage.
Watch our Obamacare subsidies video
To find out more about ACA or Obamacare subsidies, including enrollment deadlines and eligibility, watch our Obamacare subsidies video.
How Obamacare subsidies work
The Affordable Care Act (the law commonly referred to as the ACA or Obamacare) made subsidies available to help qualifying American pay for their health insurance premiums. These subsidies work on a sliding scale, limiting what you are personally required to contribute toward your premiums to a fixed percentage of your annual income.
The dollar value of your subsidies will depend in part on the cost of the benchmark Obamacare plan in your area. If the benchmark plan costs more than a certain percentage of your estimated annual income, you can get a subsidy in the amount of the difference. You may then use that subsidy when you buy a qualified Obamacare health insurance plan.
In order to calculate your Obamacare subsidy amount, the following variables are considered:
- How much does the benchmark plan cost where you live? The benchmark plan is the second-lowest cost silver plan available to you, based on where you live.
- Does that benchmark plan cost more than 2% to 9.5% of your modified adjusted gross income (or MAGI)? The percentage applied in your case will vary depending on your income.
If the benchmark plan costs more than 2% to 9.5% of your modified adjusted gross income, the amount over the total cost is equal to your subsidy.
Qualifying for Obamacare subsidies
In order to quality for Obamacare subsidies, you must meet certain criteria including:
- You must currently live in the United States.
- You must be a US citizen or legal resident.
- You cannot be currently incarcerated.
- Your income can be no more than 400$ of the federal poverty level. As of 2016, that means your income can be no more than about $47,000 for a single person or $97,000 for a family of four. The federal poverty level varies based on the number of members in your household and on where you live in the United States.
Applying for Obamacare subsidies
You can apply for Obamacare subsidies through the government-run health insurance marketplace in your state or through qualifying licensed agents and private online marketplaces that cooperate with the government marketplace. The final determination on your eligibility for a subsidy is made by the government.
Things to know about Obamacare subsidies
Anyone applying for Obamacare subsidies should know the following:
- Your eligibility for subsidies is based on your income in the year in which you’re covered by your health plan – not on your income as reported on last year’s tax return. This means that you must estimate your income when applying for subsidies.
- If you earn more than expected during the year, you may be required to pay back some or all of the subsidy dollars that were applied on your behalf to your monthly health insurance premiums.
- If you earn less than expected during the year, you may be due additional subsidy assistance, which may be applied when you file your taxes for the year.