Hey ,
I would like to inform you about the changes to the Premium Tax Credit (PTC) under the American Rescue Plan Act of 2021, and its impact on your health insurance
costs.
The PTC is a refundable credit designed to
subsidize the cost of health insurance, determined based on the percentage of household income that the cost of premiums represents.
The credit initially ranged from 2% of household income for those below 133% of the federal poverty line to 9.5% of household income for those at 400% of the federal poverty line.
But the new law extended the temporary percentage ranges that applied for 2021 and 2022 through the 2025 tax year.
The new law also extends the rule to allow the PTC for taxpayers whose household income exceeds 400% of the
federal poverty line through the 2025 tax year. Unless extended again, the percentage ranges will revert back to the 2020 amounts (adjusted for inflation) starting with the 2026 tax year.
The following table illustrates the percentage ranges under the new law compared with the inflation-adjusted amounts that applied for the tax
year 2020:
Tax Year Beginning in: | 2021 through 2025 | 2020 |
Household income percentage of federal poverty line: | Initial % to Final % | Initial % to Final % |
Up to 133% | 0% | 2.06% |
133% up to 150% | 0% | 3.09% to 4.12% |
150% up to 200% | 0% to 2% | 4.12% to 6.49% |
200% up to 250% | 2% to 4% | 6.49% to 8.29% |
250% up to 300% | 4% to 6% | 8.29% to 9.78% |
300% up to 400% | 6% to 8.50% | 9.78% |
400% and higher | 8.50% | No credit |
Under the new law, if household income is at 400% or above of the federal poverty line, the taxpayer can receive a credit of up to 8.5% of household income for premiums.
Please feel free to contact us at (202)-618-1297 if you need any help regarding your taxes.
Thank you.
Suncrest Team.
