Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Tax credits represent the taxpayers expected refunds
  • Tax credits use the refund to reduce the cost of monthly premiums
  • Eligible taxpayers must earn between 100 and 400 percent of the federal poverty level
  • The Affordable Care Act allows taxpayers to use their credits in advance

Advance tax credits make monthly premiums more manageable for millions of Americans. The CMS applies advance tax credits to the monthly premium payment.

The tax credit pays part of the monthly premium leaving a smaller portion for the customer’s monthly payment.

Comparison shopping is a great way to use tax credits and find a high-value policy. Comparison shopping goes across all types of policies and metal tiers to focus on the parts with the greatest importance. Enter your zip code above to begin.

Eligibility for Tax Credits


The question of eligibility is important. It is a broad open door policy meant to admit as many people as possible to use the option of lowering monthly premiums with Advanced Tax Credits.

The below-listed items describe particular points of eligibility:

  • You must shop and purchase insurance through the Marketplace or a state exchange
  • Income must be between the federal poverty level (FPL) and 400 percent of the FPL
  • Must not have an offer of coverage from an employer-sponsored plan as an employee
  • Must not have an offer of coverage from an employer-sponsored plan as a dependent
  • If married, one must not use the file separately option; to get credits couples must file jointly

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The Affordable Care Act and Tax Credits

Tax credits cap the monthly premium. The credits can be from two percent to nine and one-half percent of annual family income. The actual credit amount depends on annual income.

The law makes them available to persons earning between 100 percent and 400 percent of the federal poverty level. In 2016, the income levels for tax credits were as listed below.

  • Individual eligibility minimum amount is $11,770.
  • Individual eligibility maximum amount is $47,080.
  • Family eligibility minimum amount is $24,250.
  • Family eligibility maximum amount is $97,000.

Exclusive to Exchanges and Marketplace


Consumers can only get tax credits through marketplace purchases on the Obamacare Marketplace or a state exchange.

The tax credits cannot come from purchases outside of the Marketplace unless through exchange-authorized agents.

The requirement is important, and it ends to limit purchases to the open enrollment period. While it is possible to buy qualified health plans after open enrollment, these policies will not get tax credits or financial assistance.

Tax Credits and the Four Types

Tax credits can enable purchasers to get the type of policy that best fits their needs.

Many shoppers look at the price of the monthly premium as the most important selection criterion. There may be bigger risks of high costs in other parts of the plan such as the number of copays and levels of spending to reach the deductible.

When selecting among the four types of policies on the Obamacare Marketplace, comparison shopping yields important advantages.

One can focus on the elements of the plans that matter most such as deductible amounts and coinsurance rates.

  • Platinum plans have high premiums but the tax credits can reduce the monthly amount substantially over the course of a year. Platinum plans pay about ninety percent of covered benefits, and the customer pays the ten percent remainder.
  • Gold plans have high premiums but the tax credits can bring them within reach of many budget-conscious consumers. Gold plans have lower out-of-pocket expenses than silver or bronze plans. They have low copays and a moderate rate of coinsurance.
  • Silver plans have a wide range of features and deductibles. Tax credits have a big impact on the monthly expenses. Silver plans have moderate deductibles, copays, and coinsurance. Those within 250 percent of the federal poverty level can qualify for cost-sharing reduction assistance.
  • Bronze plans have the lowest premiums of any type of plan. With an advance tax credit, the monthly rates can fit within smaller budgets. The bronze plans pay sixty percent of covered benefits. These plans are ideal for those with few medical care needs.

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Tax Credits and Cost Assistance


Using tax credits, one can get a higher rated policy for a relatively low monthly premium. For the price of a bronze plan, one may be able to get a silver plan with a Health Savings Account.

This type of account has high deductibles, but it enables customers to use pre-tax dollars to pay expenses.

Taxpayers can take all or part their expected tax refund and apply it to insurance premiums.

Some prefer to pay as they go and collect their credits as a cash refund at the end of the tax year. The credits are available to apply to the monthly premium, but the choice belongs to the consumer.

Some people are not certain of their expected income. Some occupations have considerable variation, seasonality, and up or down years.

Repayment of Credits

If the taxpayer’s income does not support the tax credits issued for their account, then the taxpayer may have to repay the amounts. The idea of tax credits is that they represent a refund for the taxpayer based on his or her annual income.

The tax credits are similar to a loan or advance. The taxpayer has to repay any credits they received during the insurance cycle not supported by their refund.

One can use tax credits to soften the impact of monthly premiums. One can choose not to use them and collect the refund from the IRS. Choices can help the applicant as they see fit.

Comparison shopping is an excellent and effective way to review health plans and make a selection using tax credits to reduce the monthly costs. Taxpayers can use their credits in whole or in part and not at all if they prefer.

The options can fit the individual or family situation.

Compare health insurance options right now by entering your zip code below.