Premium Tax Credit

The Premium Tax Credit (PTC) is the ACA subsidy mechanism under Internal Revenue Code Section 36B. It equals the difference between the Second Lowest Cost Silver Plan (SLCSP) premium in your area and your expected contribution (income times your applicable percentage from the IRS table). You can take it in advance each month (Advance Premium Tax Credit, applied directly to reduce your premium) or claim the full amount when you file your tax return on Form 8962. If your actual income differs from your estimate, you reconcile the difference at tax time, potentially owing money back or receiving a refund.

Example

A single person earning $40,000 (250% FPL) in a state where the SLCSP costs $625/month. Applicable percentage: 8.44%. Expected contribution: $40,000 times 8.44% = $3,376/year ($281/month). Premium Tax Credit: $625 minus $281 = $344/month ($4,128/year).

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Health Insurance Cost Estimation

Health insurance costs most Americans between $200 and $1,800 per month depending on age, location, income, and coverage type. The Affordable Care Act (ACA) marketplace provides subsidies (premium tax credits) that reduce costs for people earning between 100% and 400% of the Federal Poverty Level (FPL). For 2026, the subsidy formula is: Premium Tax Credit = Second Lowest Cost Silver Plan premium minus (your income times your applicable percentage, which ranges from 2.1% to 9.96%). Employer-provided coverage averages $9,325/year for single plans, with employers paying roughly 79% of the cost.