Calculating the ACA Premium Assistance Tax Credit
[Reference: http://www.irs.gov/irb/2012-24_IRB/ar05.html]
Example: A family of four with an annual household income of $52,800:
1. Calculate Federal Poverty Level (FPL)
Start with Federal Poverty Level (FPL) for 1 person [$11,490 for 2013, see ref. pg 4] and add an
additional $4,020 [2013] for each additional family member ($4,020 x 3 = $12,060)
Family of four FPL  $11,490 + $12,060 = $23,550
2. Figure the Family’s Contribution
a. Figuring the Applicable Percentage - In general. The applicable percentage multiplied by a
taxpayer’s household income (income of whoever is included on taxpayer’s return)
determines the taxpayer’s required share of premiums for the benchmark plan. This required
share is subtracted from the adjusted monthly premium for the applicable benchmark plan
when computing the premium assistance amount.
i. Figure the percentage that the income exceeds FPL
1. Income compared to FPL = (Total household income) = $52,800 = 2.22
(FPL for family of 4)
23,550
2. Percentage that income exceeds FPL = 2.24 x 100 = 224%
ii. Using the Applicable Percentage Table, determine portion of the premium that the
family will contribute
Applicable Percentage Table (table (g)(2)ref IRS link above)
Household income percentage of
Federal poverty line
Initial percentage
Final percentage
Less than 133%
2.0%
2.0%
At least 133% but less than 150%
3.0%
4.0%
At least 150% but less than 200%
4.0%
6.3%
At least 200% but less than 250%
6.3%
8.05%
At least 250% but less than 300%
8.05%
9.5%
At least 300% but less than 400%
9.5%
9.5%
Calculating the Premium Assistance Tax Credit
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1. Find the range where the %IncomeExceedingFPL lies
224% is between 200-250  so Appl% is btw 6.3 – 8.05%
2. Using the Applicable% Table, figure the Appl%
Applicable % = (224-200) /(250-200) x (final % - initial %) + Initial%
Applicable% = (24/50) x (8.05-6.3) + 6.3 = .84 + 6.3 = 7.14%
b. Figure Family’s Contribution towards premium
$ContributionFamily = Family Income x Applicable Percentage
$ContributionFamily = $52,800 x .0714 = $3,770
3. To figure the Premium Assistance Tax Credit subtract the Family Contribution from the annual
cost of a Silver Plan for the respective state insurance exchange.
PremiumAssistanceTaxCredit = $SilverPlan (per state exchange) - $FamilyContribution
The following examples are from www.Treasury.gov, originally released in Aug 2011 using 2011 FPL
amounts, below examples have been updated by using 2013 FPL:
Example 1: Family of Four with Income of $52,800, Purchases Benchmark Plan (Using 2013 FPL)
The premium tax credit is generally set based on the benchmark plan. The family’s expected contribution is a
percentage of the family’s household income.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,770
• Premium for Benchmark Plan: $9,000
• Premium Tax Credit: $5,230 ($9,000 - $3,770)
• Premium for Plan Family Chooses: $9,000
• Actual Family Contribution: $3,770
Calculating the Premium Assistance Tax Credit
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Example 2: Family of Four with Income of $52,800, Purchases Less Expensive Plan
If a family chooses a plan that is less expensive than the benchmark plan, the family will generally pay less, thereby
creating an incentive to choose a less costly plan and reducing overall health care costs.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,770
• Premium for Benchmark Plan: $9,000
• Premium Tax Credit: $5,230 ($9,000 - $3,770)
• Premium for Plan Family Chooses: $7,500
• Actual Family Contribution: $2,270 ($7,500 - $5,230)
Example 3: Family of Four with Income of $52,800, Parents are between the ages of 55 and 64
Because premiums are generally higher for older individuals, the premium tax credit also is higher for these
individuals.
• Income as a Percentage of FPL 224%
• Expected Family Contribution: $3,770
• Premium for Benchmark Plan: $14,000
• Premium Tax Credit: $10,230 ($14,000 - $3,770)
• Premium for Plan Family Chooses: $14,000
• Actual Family Contribution: $3,770
*http://www.treasury.gov/press-center/Documents/36BFactSheet.PDF (Figures in this link reflect 2011 FPL).
Calculating the Premium Assistance Tax Credit
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2013 POVERTY GUIDELINES
The following figures are the 2013 HHS poverty guidelines which are scheduled to be published in the
Federal Register on January 24, 2013. (Additional information will be posted after the guidelines are
published.)
2013 POVERTY GUIDELINES FOR THE 48
CONTIGUOUS STATES
AND THE DISTRICT OF COLUMBIA
Persons in family/household Poverty guideline
For families/households with more than 8 persons,
add $4,020 for each additional person.
1
$11,490
2
15,510
3
19,530
4
23,550
5
27,570
6
31,590
7
35,610
8
39,630
http://aspe.hhs.gov/poverty/13poverty.cfm
If you live in Alaska or Hawaii your guidelines will differ. For Alaska start with $14,350 and add $5,030 for each
additional household member. For Hawaii start with $13,230 and add $4,620 for each additional household
member.
Calculating the Premium Assistance Tax Credit
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