How the Premium Tax Credit Income Limits Work
The premium tax credit is a federal tax benefit that lowers your monthly health insurance payments if your household income falls within a certain range. The income limits change each year and depend on the federal poverty line for your household size. For 2024, you may be able to use the credit if your income is between 100% and 400% of the federal poverty line — though some people below 100% may also may have access to in certain states.
The credit itself is not a fixed dollar amount. Instead, it reduces what you owe for a "benchmark" health plan (usually the second-lowest Silver plan in your area). If your income is lower, the credit covers more of the premium. If your income is higher within the range, it covers less. You receive the credit as a monthly payment directly to your insurance company, which lowers your bill.
Income limits are tied to the federal poverty guideline, which the Department of Health and Human Services updates each year. A single person's 2024 poverty line is $15,060; for a family of four it is $31,200. The 400% limit for a single person is therefore $60,240; for a family of four it is $124,800. These numbers shift annually, so the limits you see this year will not match next year's limits.
Key Takeaways
- The premium tax credit is available to people whose household income falls between 100% and 400% of the federal poverty line, with limits that change each year based on household size.
- Your income is measured as your modified adjusted gross income (MAGI), which is usually your tax return income plus certain untaxed foreign income and tax-exempt interest.
- If your actual income turns out to be higher than you estimated when you enrolled, you may owe back some of the credit when you file your tax return.
- Some states have expanded programs that allow people below 100% of the poverty line to receive the credit, so your state rules may be wider than the federal minimum.
- You report your expected income for the year when you enroll in a health plan through the marketplace, not your previous year's tax return.
What Income Counts Toward the Limit
The income that matters for the premium tax credit is your modified adjusted gross income (MAGI), not your total household income. MAGI is usually your adjusted gross income from your tax return, plus certain types of untaxed income. For most people, MAGI and AGI are the same number.
MAGI includes wages, self-employment income, interest, dividends, rental income, and Social Security benefits (if you are required to file). It also includes untaxed foreign income and tax-exempt interest from municipal bonds. It does not include child support you receive, Supplemental Security Income (SSI), or certain veterans' benefits.
When you enroll in a health plan through the marketplace, you report your expected income for that year, not last year's income. If you expect to earn $45,000 this year but earned $38,000 last year, you report $45,000. This matters because the credit is based on what you will actually earn, not what you earned before.
2024 Income Limits by Household Size
| Household Size | 100% of Poverty Line | 400% of Poverty Line |
|---|---|---|
| 1 person | $15,060 | $60,240 |
| 2 people | $20,440 | $81,760 |
| 3 people | $25,820 | $103,280 |
| 4 people | $31,200 | $124,800 |
| 5 people | $36,580 | $146,320 |
| 6 people | $41,960 | $167,840 |
| 7 people | $47,340 | $189,360 |
| 8 people | $52,720 | $210,880 |
For households larger than eight people, add $5,380 to the 100% line and $21,520 to the 400% line for each additional person. These figures are the 2024 federal poverty guidelines and will change in 2025.
What Happens If Your Income Changes During the Year
If your income drops during the year — because you lost a job, had hours cut, or started a business that earned less than expected — you can report the change to the marketplace. The marketplace will recalculate your credit based on your new expected income for the rest of the year. This usually means a larger credit and lower monthly payments going forward.
If your income rises during the year, you are not required to report it when ready, but you should. If you do not report an increase and your actual year-end income is higher than what you estimated, you will owe back some or all of the credit when you file your tax return. The amount you owe is called a reconciliation, and it reduces your tax refund or increases what you owe.
To avoid a large bill at tax time, report income changes as soon as you know about them. You can update your information on Healthcare.gov or your state marketplace website at any time during the year.
State Variations and Medicaid Expansion
Some states have expanded their Medicaid programs to cover people with income below 100% of the federal poverty line. In those states, you may be able to receive coverage through Medicaid instead of using the premium tax credit. Other states have not expanded Medicaid, so people below 100% of the poverty line in those states cannot use the credit and may have no coverage option through the marketplace.
A handful of states also offer their own state tax credits or subsidies that work alongside the federal premium tax credit. These vary widely and are not available everywhere. When you enroll through your state marketplace, you will see whether you may have access to for any state-level help in addition to the federal credit.
How the Credit Amount Is Calculated
The premium tax credit is not a flat amount — it is the difference between what the benchmark plan costs and what you are expected to pay based on your income. The benchmark plan is usually the second-lowest Silver plan available in your area. The marketplace calculates what that plan costs for your age and location, then subtracts an "applicable percentage" of your income.
The applicable percentage increases as your income rises. At 100% of the poverty line, you pay roughly 2% of your income toward the benchmark plan premium. At 400% of the poverty line, you pay roughly 8.5% of your income. The credit covers the rest. If a plan costs less than your expected contribution, you do not receive a credit for that plan — you would pay the full premium yourself.
This is why people with lower incomes within the range receive larger credits. Someone earning $20,000 per year pays a smaller dollar amount toward premiums than someone earning $80,000, even though both are within the 100% to 400% range.
Frequently Asked Questions
Can I get the premium tax credit if I am self-employed?
Yes. Self-employment income counts toward your MAGI. You report your expected net self-employment income (after business expenses) when you enroll. If your business income is unpredictable, estimate conservatively to avoid owing back the credit at tax time.
What if my spouse and I file taxes separately?
If you file separate tax returns, you are generally not may be able to access for the premium tax credit, even if your individual incomes are within the limit. There are narrow exceptions for people who are legally separated or victims of domestic abuse. Married couples almost always benefit from filing jointly to access the credit.
Do I have to report my spouse's income if we are married?
Yes. Household income includes the income of your spouse, even if your spouse does not need health insurance or will not be on your plan. The marketplace counts both incomes together to determine your household's MAGI.
What counts as a dependent for household size?
A dependent is anyone you claim on your tax return, including children, adult children, parents, or other relatives. Dependents count toward your household size for the income limit, which can actually help you — a larger household has a higher income limit.
Can I use the premium tax credit if I have employer health insurance?
Generally no. If your employer offers health insurance and it is considered "affordable" (your share of the premium is less than about 8.5% of your household income), you are not may be able to access for the credit. However, if your employer's plan is not affordable or does not cover your spouse or dependents, you may be able to use the credit for marketplace coverage.