What Is the Premium Tax Credit?
Applies to the United States. The Premium Tax Credit (PTC) is a refundable federal tax credit under the Affordable Care Act (ACA) that helps eligible individuals and families afford health insurance purchased through the Health Insurance Marketplace. This calculator gives a simplified estimate based on the inputs you provide and is not a substitute for the official IRS Form 8962 or Marketplace eligibility determination. Limits and applicable-percentage tables change each tax year.
How to Use It
Enter your annual household income, the applicable percentage (the share of income the ACA expects you to contribute toward the benchmark plan — found in the IRS Form 8962 instructions for your tax year), the annual benchmark (second-lowest-cost Silver plan, or SLCSP) premium, and the annual premium of the plan you chose. The calculator returns your expected contribution, the estimated credit, and what you would actually pay.
The Formula
First, your expected contribution is your income multiplied by the applicable percentage. The credit is the benchmark premium minus that contribution. The credit can never be negative, and it can never exceed the premium of the plan you actually enrolled in. Your net premium is the plan premium minus the credit.
$$\text{credit} = \max\left(0,\ \min\left(\text{premium},\ \text{benchmarkPremium} - \text{income} \times \text{pct}\right)\right)$$
Worked Example
Suppose your income is $40,000, your applicable percentage is 6.5%, your benchmark premium is $7,200, and your chosen plan premium is $6,600. Expected contribution = \(40{,}000 \times 0.065 = \$2{,}600\). Credit = \(7{,}200 - 2{,}600 = \$4{,}600\) (below the $6,600 plan premium, so not capped). Net premium = \(6{,}600 - 4{,}600 = \$2{,}000\) per year, or about $166.67 per month.
FAQ
Why is the credit based on the benchmark plan, not my plan? The ACA ties the credit to the second-lowest-cost Silver plan in your area. You can apply the same dollar credit to any Marketplace plan, but a more expensive plan means you pay the difference.
Can the credit be more than I owe? The credit is capped at the premium of the plan you enroll in — you can't get back more than the plan costs.
Is this the official figure? No. It is an estimate. Your final credit is reconciled on IRS Form 8962 using your actual annual income and the official applicable-percentage table for the tax year.
