Advanced Premium Tax Credit

Definition of 'Advanced Premium Tax Credit'


A type of federal subsidy that reduces the amount individuals pay for their monthly health insurance premiums. Advanced Premium Tax Credits are a provision in the Patient Protection and Affordable Care Act, signed into law on March 23, 2010 by President Barack Obama. The tax credits are sent directly from the government to eligible individuals’ health insurers to reduce monthly premium payments. If eligible, the tax credit amount a person receives depends on his/her income; you will pay more for the monthly premium if your income falls near the top of the range, and less if your income is closer to the bottom.

Investopedia explains 'Advanced Premium Tax Credit'


Since it is a direct payment made to the insurance provider, individuals who qualify for the Advanced Premium Tax Credit do not need to pay the entire amount of their premium up front. To qualify for the Advance Premium Tax Credit, you must be ineligible for public coverage (Medicaid and Children’s Health Insurance Plan - CHIP), be unable to get qualified health insurance through an employer, and have a modified adjusted gross income that falls between 100% and 400% of the federal poverty level (FPL), as shown in the following table (as of 2014):

 

 

Family Size

100% FPL

400% FPL

1

$11,490

$45,960

2

$15,510

$62,040

3

$19,530

$78,120

4

$23,550

$94,200

5

$27,570

$110,280

6

$31,590

$126,360

7

$35,610

$142,440

8

$39,630

$158,520

 
Advanced Premium Tax Credits are not automatic, and individuals must apply for them on the Health Insurance Marketplace. Eligible individuals can decide how much advance credit payments will be applied to their premiums each month – up to a maximum amount. A refundable credit will be given on an individual’s federal income tax return if the amount of advance-credit payments is less than the tax credit they should have received. Conversely, individuals will have to repay any excess advance payments with their tax returns if the advance payments for the year are more than the credit amount.

To qualify for Advanced Premium Tax Credits (and/or Cost-Sharing Reductions, the second federal subsidy designed to help lower costs for health insurance coverage), you must purchase coverage through the Health Insurance Marketplace.



comments powered by Disqus
Hot Definitions
  1. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  2. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  3. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  4. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
  5. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  6. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
Trading Center