What Are Health Care Tax Break Credits?

Certain taxpayers may be eligible for a health care premium tax break credit. It can be useful to individuals and families with low to moderate income, helping them to afford quality health care through the Health Insurance Marketplace. For those who owe no taxes, the total credit can be issued as a refund. In order to qualify for this credit, filers must meet certain criteria:

  • Have household income ranging 100-400% of the current poverty level
  • Are not claimed as dependents by another
  • Cannot receive insurance through employer or a government program
  • File as something other than Married Filing Separately

As this tax credit is income-based, anything that potentially affects household income can change the amount of the refundable credit. The most obvious change is an actual increase in income, which includes lump sum payments from disability benefits, retirement accounts or social security. Debt forgiveness may also play a role in adjusting how much credit one can get toward helping with health care expense. Life events such as divorce, marriage, birth of a child or change of address can also affect the premium tax credit.

If your employer offers insurance, you must be able to show that it does not pass the affordability test. Typically, insurance is considered affordable if it covers the minimum value required and the self-only coverage does not exceed 9.5% of the household income. If an employer offers multiple options, the affordability test is applied to one with the lowest cost that satisfies the minimum coverage requirement.

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