How Income Limits Work for the Premium Tax Credit
The Premium Tax Credit reduces what you pay for health insurance on the marketplace. The amount you receive depends on your household income compared to the federal poverty line for your family size. The IRS sets these income thresholds each year, and they change based on inflation.
You can receive a Premium Tax Credit if your income falls between 100% and 400% of the federal poverty line. Below 100%, you may be directed toward Medicaid instead (depending on your state). Above 400%, you do not may have access to for the credit, though you can still buy marketplace insurance at full price.
The credit itself is not a fixed dollar amount — it is calculated based on the difference between what the second-lowest-cost Silver plan costs in your area and what the government says you should pay based on your income. The lower your income within the may have access to range, the larger your credit.
Key Takeaways
- Income limits for the Premium Tax Credit range from 100% to 400% of the federal poverty line, which changes each year and varies by family size.
- The federal poverty line for 2024 is $15,060 for a single person and $31,200 for a family of four, but these figures increase annually.
- Your household income determines both whether you may have access to and how much credit you receive — lower income means a larger credit.
- If your income falls below 100% of the poverty line, you may be directed to Medicaid instead, which varies by state.
- You must report your expected income for the year you want coverage, not your previous year's tax return, though the IRS may ask for verification later.
Federal Poverty Line Thresholds for 2024
The federal poverty line is the baseline used to calculate your may be able to access and credit amount. For 2024, the poverty line is $15,060 for a single person, $20,440 for a family of two, $25,820 for a family of three, and $31,200 for a family of four. Each additional family member adds roughly $5,380 to the threshold.
To find your income limit for the Premium Tax Credit, multiply the poverty line for your family size by 4. For a single person, that is $60,240. For a family of four, it is $124,800. These numbers are the maximum income at which you can receive any credit at all.
The poverty line increases each year, so the income limits also increase. The IRS publishes updated figures in the fall for the following year. If you are shopping for coverage in 2025, use the 2025 poverty line, not the 2024 figures.
How Your Actual Income Is Counted
The IRS counts modified adjusted gross income (MAGI) when determining your Premium Tax Credit. For most people, MAGI is the same as adjusted gross income from your tax return. It includes wages, self-employment income, interest, dividends, and certain other sources.
Some income is excluded from MAGI. Tax-exempt interest (such as from municipal bonds) does not count. Certain foreign income exclusions also do not count. If you receive Social Security, only half of it counts toward MAGI in most cases.
When you explore for marketplace coverage, you report your expected income for the year you want insurance, not what you earned last year. If you expect to earn $35,000 this year but earned $50,000 last year, you report $35,000. The marketplace uses this estimate to calculate your credit. If your actual income turns out to be different, the IRS reconciles the difference when you file your tax return.
What Happens If Your Income Changes During the Year
If your income drops during the year — because you lost a job, had hours cut, or had a major life change — you can report the change to the marketplace. This triggers a special enrollment period, which allows you to update your income estimate outside the normal open enrollment window.
When you report lower income, your credit increases, and your monthly premium payment decreases. The marketplace recalculates your credit right away, and the new amount applies to future months. You do not receive a refund for the months you already paid at the higher rate.
If your income rises during the year, you should also report it. Your credit decreases, and your monthly payment increases. Failing to report higher income means you will owe back the excess credit when you file your taxes.
Income Limits by Family Size (2024 Reference)
| Family Size | 100% of Poverty Line | 400% of Poverty Line (Maximum) |
|---|---|---|
| 1 person | $15,060 | $60,240 |
| 2 people | $20,440 | $81,760 |
| 3 people | $25,820 | $103,280 |
| 4 people | $31,200 | $124,800 |
| 5 people | $36,580 | $146,320 |
| 6 people | $41,960 | $167,840 |
| 7 people | $47,340 | $189,360 |
| 8 people | $52,720 | $210,880 |
These figures are for 2024 and will increase for 2025. The IRS publishes updated poverty guidelines each year, usually in January. When you shop for coverage, use the poverty line for the year your coverage begins, not the current calendar year.
Medicaid and the Income Cliff Below 100%
If your income falls below 100% of the federal poverty line, you do not may have access to for the Premium Tax Credit. Instead, you are typically directed toward Medicaid, which is a separate program run by your state.
However, Medicaid income limits vary by state. Some states have expanded Medicaid to cover people up to 138% of the poverty line. Other states have much lower limits. If your state has not expanded Medicaid and your income is below the state's threshold, you may fall into a gap where you do not may have access to for either program.
You can still buy marketplace insurance without a credit if you choose, but you will pay the full premium. Some states offer state-funded programs for people in this gap, though these are limited and vary widely.
Frequently Asked Questions
What counts as household income for the Premium Tax Credit?
Household income is your modified adjusted gross income (MAGI) plus the MAGI of anyone else you claim as a dependent on your tax return. If you are married and filing jointly, both spouses' income counts. If you have adult children living with you whom you claim as dependents, their income counts too. If they are independent and file their own taxes, their income does not count toward your household total.
Can I use last year's tax return to prove my income?
No. The marketplace asks for your expected income for the year you want coverage. You can use last year's tax return as a reference point, but you must report what you actually expect to earn this year. If circumstances have changed — a new job, job loss, reduced hours — your expected income may be very different from last year. You can update your income estimate at any time if your situation changes.
What happens if I underestimate my income?
If you report lower income than you actually earn, you receive a larger credit than you should. When you file your tax return, the IRS reconciles the difference. You will owe back the excess credit you received. This is why it is important to report income as accurately as you can and update it if your situation changes during the year.
Do I lose the credit if I earn exactly 400% of the poverty line?
No. The income limit is 400% of the poverty line, meaning you can earn up to that amount and still receive some credit. If you earn above 400%, you do not may have access to. The credit amount decreases as your income rises, so at 400% you receive a smaller credit than someone at 300%, but you still may have access to.
How do I know what the poverty line is for my state?
The federal poverty line is the same across all states — there is no state-by-state variation for the Premium Tax Credit calculation. However, Medicaid income limits do vary by state. When you explore for marketplace coverage, the website will show you the income limits that explore based on your family size and the year you want coverage.