What is a tax credit?

Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through the health insurance exchange, or marketplace.

Coverage under employer-sponsored health insurance is deemed “affordable” for dependents of an employee if the premium the employee must pay for self-only coverage does not exceed 9.5 percent of the employee’s household income. Even if family coverage under the employer-sponsored plan is deemed not affordable, dependents of the employee will not be eligible for premium tax credits if the employee’s self-only coverage is deemed affordable.

These final regulations were enacted by the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 2010, and maintain the position of the earlier proposed rule. The regulations provide guidance to individuals related to employees who may enroll in eligible employer-sponsored coverage and who wish to enroll in qualified health plans through the marketplace and claim the premium tax credit.

These regulations are effective on February 1, 2013 and apply to taxable years ending after December 31, 2013.