What is a premium tax credit?

A premium tax credit is a subsidy designed to make health insurance more affordable for individuals and families who purchase their insurance through the health insurance marketplace. This financial assistance reduces the amount they need to pay each month for their premiums, thereby lowering the overall cost of obtaining health coverage.

By offering this tax credit, the government aims to increase access to health insurance for those with qualifying incomes, making it more feasible for more people to secure necessary medical coverage. The premium tax credit is calculated based on your income and household size, ensuring that it provides the biggest help to those who need it most.

This option is distinct from a simple healthcare expense credit or a cash reward for healthy behavior, as those do not directly pertain to the structure of contributions towards monthly premiums. Furthermore, it is not a deduction reserved for high-income individuals, but rather a targeted subsidy that assists those with lower to moderate incomes in affording their health insurance premiums.