Understanding ACA Subsidies
The Advance Premium Tax Credit (APTC) can significantly reduce your monthly health insurance costs. Here's how it works.
The Advance Premium Tax Credit (APTC) is a federal subsidy that helps lower your monthly health insurance premiums. Instead of waiting until tax time, you can apply this credit directly to your monthly payments.
The amount you receive is based on your expected household income and the cost of the "benchmark" plan in your area (the second-lowest cost Silver plan, or SLCSP).
The formula is straightforward:
Step 1: Calculate your income as a % of Federal Poverty Level (FPL)
Income ÷ FPL for your household size = FPL%
Step 2: Look up your "applicable percentage"
This determines how much of your income should go toward premiums
Step 3: Calculate expected contribution
Income × Applicable Percentage = Your expected annual contribution
Step 4: Calculate your subsidy
Benchmark Premium − Expected Contribution = Your APTC
Good news: Under the Inflation Reduction Act (extended through 2025), the "subsidy cliff" at 400% FPL has been eliminated. Now, no one pays more than 8.5% of their income for the benchmark plan.
| Income (% of FPL) | You Pay | Example (Single) |
|---|---|---|
| 100% - 150% | 0% | $15,060 - $22,590 |
| 150% - 200% | 0% - 2% | $22,590 - $30,120 |
| 200% - 250% | 2% - 4% | $30,120 - $37,650 |
| 250% - 300% | 4% - 6% | $37,650 - $45,180 |
| 300% - 400% | 6% - 8.5% | $45,180 - $60,240 |
| 400%+ | 8.5% (capped) | $60,240+ |
Scenario: Single person, age 35, earning $45,000/year in California
This person would pay around $221/month for the Silver benchmark plan, saving $329/month. They could apply the same credit to any metal tier.
- 1Use it on any metal tier: Your subsidy is calculated based on the Silver benchmark, but you can apply it to Bronze, Gold, or Platinum plans too.
- 2Report income changes: If your income changes during the year, update your Marketplace application to adjust your credit and avoid surprises at tax time.
- 3It's reconciled on your taxes: At tax time, your actual income is compared to your estimate. You may owe money back or get a refund.
- 4You must file taxes: To keep your tax credit, you must file a federal tax return even if you don't normally need to.