Individuals earning nearly $46,000 a year and families of four earning $94,000 may be eligible for federal tax credits under the new health care law.
Tax credits are the mechanism by which the federal government caps how much people pay for health insurance premiums, which are set by the private market. The premium caps are based on how much someone earns, relative to the federal government’s definition of poverty.
Here’s an example of how premiums are calculated for, say, young, single workers who earn between $17,236 and $22,980 per year, which is between one-and-one-half and two times the poverty level. The premiums, which range from 4 percent to 6.3 percent of their income, start at about $57 a month for those at the low end of this income range and up to $121 at the high end.
In the following charts, Squared Away converted into dollars the income and premiums that the Henry J. Kaiser Foundation, in its brief on the healthcare law, has expressed as percentages of the U.S. poverty thresholds:
Taxpayers can lower their premiums immediately by directing the government to pay the tax credit to the insurer, or they can wait and claim the credit when they file their 2014 tax return.
Lower-income adults who purchase the “Silver” healthcare plan may also qualify for help paying their deductibles and copayments.