Updated Income Limits and Subsidy for Obamacare in 2024

You probably have heard on the news about getting health plans for as low as $0 and having many questions regarding how. 

While there are many articles written about this topic, they are rather technical and full of jargon. As a former healthcare administrator who worked in both hospital, medical office, and corporate healthcare but also a healthcare consumer myself, I am writing this article as the most comprehensive and updated 2021 guide to help you understand ACA subsidy in layman terms. 

Article is updated to include the impact of the American Rescue Act in 2021 and will continue to be updated when there are legislations. 

There are two types of ACA subsidies.

According to the IRS, the legal name of the ACA subsidy is Premium Tax Credit. This is a defined amount that you could use to help pay for health insurance premiums. 

When signing up for an ACA plan, the exchange will calculate how much credit you are eligible for based on your income level. 

There are two options for Premium Tax Credit/subsidy. For the standard Premium Tax Credit, you are responsible to pay 100% of health insurance premiums but you can get some of it credited back in the form of more refund when filing for tax return every Spring. 

The more popular option is called Advance Payments of Premium Tax Credit. Under this option, you claim the credit in advance and only pay a portion of the health insurance premiums. At the end of the tax year, if you claim more credit than allowed, you will have to pay it back. 

Misconception: ACA/Obamacare subsidy or Premium Tax Credit is simply a discount.

Truth: the subsidy is not a discount but rather a tax credit that you can claim at the end of the year (think more refund) or in advance (like a loan that might be forgiven). If you claim more than eligible, you will have to pay it back.