The Affordable Care Act (ACA), often referred to as Obamacare, provides subsidies to help individuals and families with low to moderate incomes afford health insurance coverage through the Health Insurance Marketplace. These subsidies are designed to make health insurance more affordable by reducing the cost of monthly premiums and, in some cases, out-of-pocket expenses. Here’s how ACA subsidies work:
Premium Tax Credits (PTCs):
Premium tax credits, also known as subsidies, are designed to lower the monthly premium costs for health insurance plans purchased through the Health Insurance Marketplace.
Eligibility is primarily based on your income and household size. You are eligible for premium tax credits if your income falls within a specific range, typically between 100% and 400% of the federal poverty level (FPL). The exact income thresholds can vary by year and by state, FPL amounts are below.
The premium tax credit is calculated on a sliding scale, with those with lower incomes receiving larger subsidies. The lower your income, the higher the subsidy, and the less you’ll pay for monthly premiums.
When you apply for coverage through the Marketplace, your subsidy amount is determined based on your income and other relevant information. The subsidy is applied directly to your chosen health insurance plan, reducing the amount you pay for premiums each month.
You may choose to use all of your subsidy, a portion, or none. Your PTC will be reconciled on your taxes. Reconciliation information is below.
You may be eligible for a PTC even if you have coverage through your employer. Additional information is at the bottom of this page.
Cost-Sharing Reductions (CSRs):
Cost-sharing reductions are additional subsidies available to individuals and families with lower incomes, usually between 100% and 250% of the federal poverty level.
Cost-sharing reductions reduce the out-of-pocket expenses associated with your health insurance plan. This includes lowering deductibles, co-payments, and coinsurance.
To benefit from cost-sharing reductions, you must choose a Silver-level plan through the Marketplace. Silver plans are designed with cost-sharing features that reflect these reductions.
Applying for Subsidies:
To apply for premium tax credits and cost-sharing reductions, you must fill out a Marketplace application during the annual Open Enrollment period or during a Special Enrollment Period if you qualify due to a life event.
When you provide information about your income, family size, and other relevant factors on the application, the Marketplace will determine your eligibility for subsidies.
The Marketplace will then display the health insurance plans available to you, along with the subsidies you qualify for, making it easier to compare plans and choose one that fits your budget and healthcare needs.
Reconciliation on Tax Return:
Subsidies are initially estimated based on the information you provide when applying for coverage.
When you file your federal income tax return for the year, the IRS will reconcile your actual income with the estimated income used to determine your subsidy amount. If there is a difference, you may receive additional subsidies or be required to repay excess subsidies.
ACA subsidies play a critical role in making healthcare coverage more affordable for millions of Americans. If you believe you may be eligible for subsidies, it’s essential to explore your options through the Health Insurance Marketplace and provide accurate income information to determine the level of assistance you qualify for.
Minimum income to receive subsidy based on your MAGI
Persons in Family/Household
2023 Coverage (2022 Poverty Levels)
2024 Coverage (2023 Poverty Levels)
2025 Coverage (2024 Poverty Levels)
1
$13,590
$14,580
$15,060
2
$18,310
$19,720
$20,440
3
$23,030
$24,860
$25,820
4
$27,750
$30,000
$31,200
5
$32,470
$35,140
$36,580
6
$37,190
$40,280
$41,960
7
$41,910
$45,420
$47,340
8
$46,630
$50,560
$52,720
For families/households with more than 8 persons, add $5,380 for each additional person (2024).
Employer Coverage and Affordability Calculator
Job-based health plan is considered “affordable” if your share of the monthly premium in the lowest-cost plan offered by the employer is less than 9.12% of your household income.
The lowest-cost plan must also meet the minimum value standard.
If you’re the employee, affordability is based on only the premium you’d pay for self-only (individual) coverage.
For coverage starting January 1, 2023, if you’re offered job-based coverage through a household member’s job, affordability is based on the premium amount to cover everyone in the household.
Total household income includes incomes from everybody in the household who’s required to file a tax return.
If the premiums aren’t considered affordable for the employee and the household, they may qualify for savings in a Marketplace plan. But, if the premium is considered affordable for the employee, but not for other members of the household, then only the other household members may qualify for savings.
Verifying Information
Documents to confirm your household income
The documents you submit to the Marketplace to confirm your household income must show a yearly income amount that closely matches the yearly income amount you entered on your application. For example, if you have a different job than you had last year, send the Marketplace recent pay stubs from your new job, instead of last year’s tax return or W2.
Self-employment ledger documentation (Link to e-sign web form ledger) (can be a Schedule C, the most recent quarterly or year-to-date profit and loss statement, or a self-employment ledger). Must contain your first and last name, company name, and income amount. If you’re submitting a self-employment ledger, include the dates covered by the ledger, and the net income from profit/loss.
1040 federal or state tax return. Must contain your first and last name, income amount, and tax year. If you file Schedule 1, you must submit it with your 1040.
Wages and tax statement (W-2 and/or 1099, including 1099 MISC, 1099G, 1099R, 1099SSA, 1099DIV, 1099SS, 1099INT). Must contain your first and last name, income amount, tax year, and employer name (if applicable).
Pay stub. Must contain your first and last name, income amount, and pay period or frequency of pay with the date of payment. If a pay stub includes overtime, tell us the average overtime amount per paycheck.
Social Security Administration Statements (Social Security Benefits Letter). Must contain first and last name, benefit amount, and frequency of pay.
Unemployment Benefits Letter. Must contain your first and last name, source/agency, benefits amount, and duration (start and end date, if applicable).
Or, complete a written explanation form (Link to e-sign explanation form). To submit this form, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm self-employment income
1040 SE with Schedule C, F, or SE (for self-employment income)
1065 Schedule K1 with Schedule E
Tax return
Bookkeeping records
Receipts for all allowable expenses
Signed time sheets and receipt of payroll, if you have employees
Most recent quarterly or year-to-date profit and loss statement
Or, complete a written explanation form (PDF, 126 KB). To submit this form, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm unearned income
Annuity statement
Statement of pension distribution from any government or private source
Worker’s compensation letter
Prizes, settlements, and awards, including court-ordered awards letter
Proof of gifts and contributions
Proof of inheritances in cash or property
Proof of strike pay and other benefits from unions
Sales receipts or other proof of money received from the sale, exchange, or replacement of things you own
Interests and dividends income statement
Loan statement showing loan proceeds
Royalty income statement or 1099-MISC
Proof of bonus/incentive payments
Proof of severance pay
Pay stub indicating sick pay
Letter, deposit, or other proof of deferred compensation payments
Pay stub indicating substitute/assistant pay
Pay stub indicating vacation pay
Proof of residuals
Letter, deposit, or other proof of travel/business reimbursement pay
Or, complete a written explanation form (PDF, 126 KB). To submit this form, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Letter or statement from a Medicaid or CHIP agency that shows that you or your family members aren’t enrolled in or eligible for Medicaid or CHIP
Letter or statement from a Medicaid agency showing that you or a family member are enrolled in a Medicaid program that’s not considered qualifying health coverage
You can find more detailed information about Medicaid programs that don’t provide qualifying coverage. If you send document(s) verifying enrollment in one of these programs, you may be able to continue your financial help for your Marketplace coverage:
Medicaid coverage only for pregnancy-related services
Medicaid coverage only for family planning services
Medicaid coverage only for tuberculosis coverage
Medicaid coverage only for emergency treatment
Medicaid Demonstration Projects that cover a limited range of benefits
Medicaid coverage for “medically needy” individuals whose income is too high for traditional Medicaid and cover a limited range of benefits. These programs are sometimes known as “Share of Cost” or “Spend Down” programs.
A letter describing your recent health coverage including:
The name of the Medicaid/CHIP program you were enrolled in and when your coverage ended, or
That you were never enrolled in Medicaid/CHIP coverage, or
The name of the Medicaid/CHIP program with limited benefits that you’re enrolled in that would still allow you to enroll in the Marketplace with help paying for coverage
Documents to confirm you don’t have qualifying health coverage through TRICARE
Submit one of the documents below if you need to confirm that you don’t have coverage through TRICARE.
Letter or statement from TRICARE that shows the expiration or un-enrollment date of previous health coverage
Letter or statement from TRICARE that confirms ineligibility for health coverage
Letter, statement, or other document indicating a life change event (like divorce) that would make you or a family member ineligible for TRICARE coverage
Letter or statement from TRICARE or other government agency showing that you or a family member are enrolled in a TRICARE program that’s not considered qualifying health coverage. If you send document(s) verifying enrollment in one of these programs, you may be able to continue your Marketplace coverage with help paying for coverage:
TRICARE Plus
Direct care
Line-of-duty care
Transitional care for service-related conditions
TRICARE coverage limited to space-available care in a facility of the uniformed services for individuals excluded from TRICARE coverage for care from private sector providers.
What if I don’t have any of those documents?
You can submit a letter describing when your enrollment in TRICARE coverage ended or that you were never enrolled in TRICARE. The Marketplace will take your letter into consideration. You can use this template. To submit this letter, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm you don’t have qualifying health coverage through the Department of Veterans Affairs (VA)
Submit this document if you need to confirm that you don’t have coverage through the VA:
Letter from the VA that shows the expiration date of previous health coverage
If you don’t have this document, you can submit a letter describing that you’re not enrolled in health coverage through the VA. The Marketplace will take your letter into consideration. You can use this template. To submit this letter, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm you don’t have qualifying health coverage through Medicare
Submit this document if you need to confirm that you don’t have coverage through Medicare:
Letter or statement from Medicare or the Social Security Administration stating that you or your family members are:
Not eligible for or enrolled in premium-free Medicare Part A.
Eligible for (but not enrolled in) Part A coverage that requires premium payments. Important: A Social Security document that shows you don’t pay a premium for “Medical Insurance” refers to Part B. It’s not acceptable for verifying eligibility for Part A.
No longer eligible for Social Security Disability Insurance (SSDI) benefits, and your coverage has ended or will end in the next 90 days.
If you don’t have this document, you can submit a letter describing why you’re not eligible for premium-free Medicare Part A. The Marketplace will take your letter into consideration. You can use this template. To submit this letter, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm you don’t have qualifying health coverage through the Peace Corps
Submit this document if you need to confirm that you don’t have coverage through the Peace Corps:
Letter from the Peace Corps with the expiration date for any previous health coverage or a letter showing that you never had this type of coverage
If you don’t have this document, you can submit a letter describing that you’re no longer eligible for or enrolled in health coverage through the Peace Corps, or that you were never eligible for or enrolled in health coverage through the Peace Corps. The Marketplace will take your letter into consideration. You can use this template. To submit this letter, select “Other” from the drop-down menu when you’re on the upload screen in the application.
Documents to confirm Social Security Number (SSN)
Documents must include your first name, last name, and SSN.
Social Security card
1040 Tax Return (federal or state versions acceptable)