what percentage of the following policy amounts do you want to claim on your tax return?

Household size is a cardinal factor in determining eligibility for the premium tax credit. The post-obit Q&A explains the rules on household size and how it affects eligibility for and the amount of the premium revenue enhancement credit.

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Why does household size affair when computing eligibility for the premium tax credit?

Eligibility for the premium tax credit is based on a family unit'southward income equally a percentage of the federal poverty line (FPL). The poverty line increases with household size. Table 1 shows the federal poverty guidelines for different household sizes in the 48 contiguous states and the District of Columbia. (Alaska and Hawaii each have their own federal poverty guidelines.) A family unit's poverty line percentage is their annual income divided by the poverty line for their household size. For instance, a married couple with two children earning $45,000 a year would divide their household income by the poverty line for a family of four — $26,200 in 2020 — to summate their income at 172 per centum of the federal poverty line. This puts them in the eligible income range for a premium revenue enhancement credit and cost-sharing reduction. (For more data on price-sharing reductions, see Key Facts: Cost-Sharing Reductions.)

Tabular array ane: Federal Poverty Line Guidelines (2020 guidelines are used for the 2021 coverage year for PTC)
Household Size	% of Federal Poverty Line (2020 guidelines)
	100%	138%	200%	250%	400%
1	$12,760	$17,608	$25,520	$31,900	$51,040
two	$17,240	$23,791	$34,480	$43,100	$68,960
three	$21,720	$29,973	$43,440	$54,300	$86,880
4	$26,200	$36,156	$52,400	$65,500	$104,800
5	$30,680	$42,338	$61,360	$76,700	$122,720

Income as a per centum of the federal poverty line too sets the amount of premium tax credit a household is eligible to receive. Families at different income levels are expected to contribute different percentages of their income towards premiums (run into Table 2), with higher income families paying a greater percentage of their income towards premiums than lower income families. The premium revenue enhancement credit is determined by subtracting the premium contribution from the price of a benchmark plan so as premium contributions rise, the premium tax credit is reduced. (For more information on how the premium taxation credit is calculated, run into Key Facts: The Premium Taxation Credit.)

Tabular array ii: Expected Premium Contribution Based on Income (for 2021 coverage)
Annual Household Income (% of FPL)	Expected Premium Contribution (% of income)
Less than 133%	2.07%
133 – 138%	3.ten – 3.41%
138 – 150%	3.41 – four.14%
150 – 200%	4.14 – 6.52%
200 – 250%	six.52 – eight.33%
250 – 300%	viii.33 – ix.83%
300 – 400%	ix.83%
More than 400%	n/a

How does the market establish household size to make up one's mind eligibility for the premium tax credit?

A person's household for premium tax credit eligibility includes all the individuals on their tax render — the taxation filer, the tax filer'southward spouse (if married filing jointly), and any dependents. Everyone is included in the household, even family members who are non applying for coverage and those who are not eligible for a premium tax credit. For example:

• Maria and Simon are married and have ane child, Elaine, whom they claim as a tax dependent. They take a revenue enhancement household of three people and earn $35,000 a year (which is 161 percent of the poverty line in 2020). Elaine is eligible for the Children'southward Health Insurance Plan (Scrap), making her ineligible for a premium tax credit, but she's all the same included in Maria and Simon's household for determining premium taxation credit eligibility.
• Suppose that Maria and Simon also accept an older daughter, Cora, who is 22 and living at home with her parents. Cora just graduated from college and is working full-time. She cannot exist claimed as a taxation dependent by her parents and files her own taxes. Even though Cora lives with her family unit, she is a household of one for premium taxation credit purposes because she cannot be claimed by her parents.

Who tin can be in a household together?

The composition of the household for premium tax credit purposes follows Internal Acquirement Service (IRS) rules for filing status and dependents. For more information on tax rules, see The Health Assister's Guide to Revenue enhancement Rules.

How do you determine the household of married couples who file split revenue enhancement returns?

To be eligible for a premium tax credit, married couples must file a joint revenue enhancement render. Married couples who file separate returns are not eligible for a premium revenue enhancement credit, with the following exceptions:

• A married person qualifies to file as head of household. A person who is married but does non programme to file jointly with a spouse can sometimes qualify as Head of Household, a filing condition that allows a person to exist eligible for a premium tax credit, rather than Married Filing Separately, which does non. In general, a person can be Head of Household if he or she is unmarried or considered unmarried. A married person is considered unmarried if he or she will live apart from his or her spouse in the last six months of the tax yr and pays more than half of the cost of keeping up the home for their dependent kid.
• A married person is a survivor of domestic violence or abuse. A taxpayer who lives apart from his or her spouse and is unable or unwilling to file a articulation tax render due to domestic violence volition exist accounted to satisfy the joint filing requirement by making an testament on his or her taxation return. Under this IRS rule, taxpayers may qualify for the premium tax credit despite having the revenue enhancement filing condition of married filing separately; or
• A married person has been abandoned by his or her spouse. . A taxpayer is still eligible for a premium tax credit despite filing separately if he or she has been abandoned by a spouse and certifies on the tax return that the spouse cannot be located after using "reasonable diligence."

The household of a person who qualifies for i of these exceptions includes the person and anyone he or she claims equally a dependent on the revenue enhancement render.

Note as well that married people who file as Head of Household are always eligible for a premium taxation credits, but married people who are survivors of domestic corruption or take been abandoned by their spouse can only qualify for those exceptions for no more than three consecutive years. (For more information on these exceptions, see the IRS rules.)

Do family unit members have to enroll in the same plan to be included in the same premium tax credit?

The tax household for premium credit eligibility is based on tax rules and doesn't always marshal with insurers' rules most who can enroll in the same plan. In the marketplace, people have the pick to purchase individual or family policies. Typically, health insurers limit family plans to simply immediate family unit members (eastward.grand., parents and their children). That means that a member of a tax household may need to enroll in a separate program if they aren't the child of the taxpayer, even if they're properly claimed as a dependent and role of the household for premium tax credit purposes. For example:

• Serena lives with her son, Jacob, and her aunt, Martha, who Serena supports. Serena is a revenue enhancement filer and claims both Jacob and Martha equally taxation dependents. Because most insurers wouldn't include Martha in a family plan covering Serena and Jacob, Martha will be in a separate wellness plan. However, fifty-fifty though they are covered through divide health plans, the family is still one revenue enhancement unit, and so their premium taxation credit is determined as a household of three, and the accelerate payment of the premium tax credit (APTC) is practical proportionally to the ii plans (see Figure 1).
• Even though part of the accelerate payment goes to Martha's wellness insurer during the year, Serena will claim the revenue enhancement credit and be responsible for reconciling the entire household's APTC, including Martha'southward portion. Considering Martha is a revenue enhancement dependent, not a taxation filer, she cannot directly claim a premium taxation credit.

On the other manus, insurers are required to allow taxpayers' children nether historic period 26 to enroll in their parents' programme, even if they are not dependents and have a separate tax household. In these cases, the IRS has established rules for how to allocate advance payments of the premium tax credit. For instance:

• Brian and Anika are married and file taxes jointly. Their 23-year-old daughter, Olivia, is not a dependent and files her own taxation return. Even though Olivia is in a different taxation household from her parents, she can enroll in a plan with them because she is under 26 years old. Even so, even if they enroll in a family programme together, the premium tax credit amount volition be determined separately for each tax household (see Figure 2). Brian and Anika's premium tax credit will be based on their income equally a household of two. Olivia's premium tax credit will be based on her income as a unmarried household fellow member.
• At tax time, Brian and Anika would file a tax return and reconcile their APTC amount and Olivia would file her ain revenue enhancement render and reconcile her APTC amount.

For a non-dependent child like Olivia, her share of the premium and her premium tax credit amount practice not vary based on whether she enrolls in a program together with or separately from her parents. In either case, the premium Olivia owes volition be based on her age, location, and smoking status, and her tax credit will be determined by her income. Having a non-dependent enroll together with other family members also makes reconciliation of the credit more than complicated. Given that, even though it'southward permitted, at that place aren't many benefits to enrolling people from separate taxation households into the same market policy.

Effigy 2: Example Plans and APTC If Multiple Households in I Family

Household of 2 (BRIAN, ANIKA); Household of 1 (OLIVIA)

Plan A Enrollees: BRIAN, ANIKA, and OLIVIA

How do mid-year changes in a person'due south household affect premium revenue enhancement credit eligibility?

A change in household size affects the household income level every bit a percentage of the poverty line, changing the premium tax credit the taxpayer is eligible to receive. Since the premium tax credit is based on annual income, the alter in household size affects the premium tax credit amount for the entire year, not only for the months after the change occurs. For example:

• A married couple with a projected income of $34,500 has income at 200 percentage of the poverty line. If they have a baby sometime during the year they become a household of three and their income would be 159 percent of the poverty line. This modify in poverty level income volition lower the household's expected contribution from 6.52 percent to 4.57 percent of income, which will make them eligible for a larger credit.

To ensure that individuals receive the correct premium tax credit for the year, household size and other changes should be immediately reported to the marketplace.

Are premium tax credit and Medicaid households the same?

No. For the premium tax credit, members of a tax household are always in the aforementioned household when determining their eligibility. For Medicaid, household size and composition are adamant separately for each member of the household. The rules look at more than than just revenue enhancement filing status; familial relationships and who physically lives in a household are too part of the determination. In some cases, Medicaid follows the premium tax household rules, merely in some cases it will not.

In addition, household rules for the premium tax credit are uniform across all states, only Medicaid provides some state options — such every bit some flexibility in the historic period limits for the definition of a child — that result in variability in household size depending on the state. For more than information on the Medicaid household rules, run across Key Facts: Determining Household Size for Medicaid.

How will the market determine whether to use Medicaid or premium tax credit household rules to determine eligibility?

An bidder tin can't be eligible for a premium tax credit if he is eligible for Medicaid, so the marketplace applies the country Medicaid rules first. It determines the family size of each private in the tax household using Medicaid rules. (If the individual is assessed or determined eligible for Medicaid, he will be transferred to his state's Medicaid agency.) If the individual is ineligible for Medicaid, so the marketplace will look at his household and eligibility for a premium taxation credit using premium tax credit rules.

View all key facts

For updated yearly percentages, please run across Reference Guide: Yearly Guidelines and Thresholds.

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Source: https://www.healthreformbeyondthebasics.org/key-facts-determining-household-size-for-premium-tax-credits/