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):
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.