What is the Health Premium Tax Credit Offered Through Covered California?
In a nutshell, the health premium tax credit is premium assistance (aka government subsidy) offered only through Covered California to help you purchase an affordable private health plan if you don't have access to other coverage (ie. employer plan, Medicare, VA Benefits, Medi-Cal). Eligibility for the tax credit is based on your household income and family size for 2014. If your annual income for 2014 is projected to be under these amounts, you may qualify:
· 1 person -- $45,960
· 2 person -- $62,040
· 3 person -- $78,120
· 4 person -- $94,200
· 5 person -- $110,280
· 6 person -- $126,360
There are three ways to apply the tax credit:
1. Take it now: Pay less monthly premium (aka the advance premium tax credit)
2. Take it later: Pay full monthly premium (get a refund when filing 2014 taxes)
3. Take it partial: Split the difference monthly premium (if income/family fluctuate)
Most will choose the advance premium tax credit in order to keep the monthly cost affordable, but some households with unknown income for 2014 may choose to be more conservative and either "take it later" or "take it partial."
For example, you have a monthly premium of $1,000 and qualify for $700 per month in advance tax credits, each month, the federal government will pay $700 directly to the private insurance company, and your monthly premium payment to the insurance company would be $300.