Previous FAQs have covered the premium tax credit (PTC) provided by §36B, but
there is one more subsidy, the cost-sharing subsidy, that assists taxpayers in
affording coverage. In order to qualify, the taxpayer generally must meet three
- The taxpayer must qualify for the PTC.
- The taxpayer must purchase a silver-level qualified plan.
- The taxpayer cannot have household income in excess of 250% of the federal
poverty level (FPL).
Although the law specifically states that an individual must have income less
than 400% of the FPL, the cost-sharing subsidy drops to zero once the taxpayer
surpasses 250%, effectively reducing the maximum FPL to qualify. Not all
benefits are covered by insurance. Most taxpayers can expect to pay out of
pocket for co-insurance, copayments and deductibles. Cost-sharing eases these
The IRS does not provide a credit for the cost-sharing subsidy; rather, the
subsidy is paid by Health and Human Services (HHS). When a taxpayer qualifies,
the percentage of total costs the taxpayer pay through the year decrease and the
insurer must pay for more out of pocket items, then HHS reimburses the insurer.
Featured in the TAXPRO Weekly - August 29, 2013