Premium Tax Credit
Tax Glossary Term
Definition
The premium tax credit (PTC) is a refundable tax credit under IRC §36B that helps eligible individuals and families afford health insurance purchased through an ACA marketplace exchange. The credit equals the difference between the premium of the second-lowest-cost Silver plan (SLCSP) in your area and your expected contribution, which is a percentage of household income determined by where you fall on the FPL percentage scale. For 2026, the enhanced ARPA/IRA subsidies have expired and the OBBBA did not extend them, restoring the 400% FPL subsidy cliff. Households above 400% FPL receive no credit. The applicable percentage ranges from 2.1% of income at 100–133% FPL to 10.0% at 300–400% FPL. The credit can be taken in advance (APTC) to reduce monthly premiums or claimed at filing on Form 8962. If advance payments exceed the actual credit, you must repay the difference.
Example
Family of 4, income $70,000.
FPL for 4 persons = $32,150.
FPL percentage = $70,000 ÷ $32,150 × 100 = 218%.
This falls in the 200–250% FPL bracket (initial 6.6%, final 8.4%).
Interpolated rate = 6.6% + (218 − 200) ÷ (250 − 200) × (8.4% − 6.6%) = 7.26%.
Expected contribution = $70,000 × 7.26% = $5,084/year.
If SLCSP = $12,000/year:
PTC = $12,000 − $5,084 = $6,916/year.