What Is the Premium Tax Credit?

The Premium Tax Credit (PTC) is a refundable federal tax credit that helps eligible individuals and families afford health insurance purchased through an ACA marketplace exchange (healthcare.gov or a state equivalent). The amount of the credit is based on your household income, family size, and the cost of the benchmark "second lowest cost silver plan" in your area — the credit makes up the difference between what you're expected to pay based on your income and the cost of that benchmark plan. You can receive the credit in advance (paid directly to your insurer each month to lower your premium) or claim it when you file your tax return. If you received advance payments of the credit during the year, you must reconcile the amount on Form 8962 — if your actual income was higher than estimated, you may have to repay some of the advance. The credit is available to those with household incomes between 100% and 400% of the federal poverty level, though pandemic-era expansions temporarily extended it to higher-income households.