Subsidies for health insurance assist individuals and families in paying for coverage in the ACA (Affordable Care Act) marketplace. There are two main types of subsidies:

1. Premium Tax Credits (PTCs) – Lower the cost of monthly insurance premiums.
2. Cost-Sharing Reductions (CSRs) – Reduced out-of-pocket expenses (deductibles, co-pays) for qualifying individuals who are enrolled in Silver-tier plans.
   
   

Eligibility for Premium Tax Credits

1. Income Requirements

• Eligible to individuals and families according to their incomes relationship to the Federal Poverty Level (FPL).
• Temporary full eligibility (no income limit) through 2025 under the American Rescue Plan Act and Inflation Reduction Act..^{2 3}

2. Other Criteria

• Must enroll in a plan through the ACA marketplace.
• Cannot be eligible for other health coverage (e.g., Medicaid, Medicare, affordable employer-sponsored plans).³

Eligibility for Cost-Sharing Reductions (CSRs)

• Income between 100% and 250% of the FPL.
• Must sign up for a Silver-tier plan on the marketplace..⁴

How Are Premium Tax Credits Calculated?

1. Based on the benchmark plan (second-lowest-cost Silver plan) in your region.
2. Your contribution is a percentage of your income, from 0% to 8.5% (temporarily reduced under recent legislation).
3. Tax credits pay the difference between the cost of the benchmark plan and your contribution..³

Federal Poverty Level (FPL) Guidelines for 2025

Federal Poverty Level changes according to family size. Here are the 2025 FPL levels:

• 1 person: $15,060
• 2 people: $20,440
• 3 people: $25,820
• 4 people: $31,200
• For each additional person: add $5,380 ⁵

Subsidy Eligibility Based on Income

• Below 100% FPL: Typically not eligible for premium tax credits, although they can receive Medicaid in states that have expanded.
• 100% to 400% FPL:  Can qualify for premium tax credits, with the subsidy reducing as income rises.
• Above 400% FPL: The subsidy cliff is eliminated through 2025, such that families above 400% FPL can still qualify if premiums are more than 8.5% of household income.^{2 3}

Expected Contribution Toward Premiums

Your required premium contribution is based on income as a percentage of FPL:

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Example Subsidy Calculations

1. Individual earning $20,000 (~133% FPL)
   
   • Expected to pay 2.07% of income ($414/year).
   • If the benchmark plan is $5,000 per year, the subsidy pays $4,586.
     
     
2. Family of four earning $60,000 (~192% FPL)
   
   • Expected to pay 4.14% to 6.52% of income ($2,484–$3,912).
   • If the benchmark plan is $15,000 per year, the subsidy pays the difference.
     
     

Note:  Actual subsidy levels depend on location, plan price, and household information. For a more accurate estimate, use the KFF Health Insurance Marketplace Calculator..²

How to Claim Subsidies

1. Premium Tax Credits:
   
   • May be used in advance to reduce monthly payments or received as a tax refund at filing.³
2. Cost-Sharing Reductions:
   
   • Applied automatically if qualified and enrolled in a Silver-tier plan.⁴

Subsidy Reconciliation & Adjustments

• Subsidies are calculated using estimated income during enrollment.
  
  
• If your actual income is different, you might:
  
  • Owe repayment if you had more subsidies than you were supposed to have.
  • Get extra tax credits if you underestimated your subsidy amount.
    
    
• Households with significant income changes (e.g., loss of job) can reconcile subsidies mid-year to prevent tax surprises.³

Special Considerations

• Lawful immigrants who earn less than 100% FPL but are not eligible for Medicaid are still eligible for subsidies.
• It's important to report changes in income during the year to steer clear of tax surprises..³

How Premium Tax Credits (ACA Subsidies) Are Calculated (2025)

The ACA premium tax credit assists qualified individuals and families in paying for health insurance by subsidizing part of their monthly premiums. The credit is determined based on income, household size, and the price of the benchmark Silver plan.

Step 1: Determine Federal Poverty Level (FPL) Percentage

The 2025 FPL guidelines (for the continental U.S.) are:⁵

Your FPL percentage dictates the projected percentage of income you are to pay toward your health insurance premium.

Step 2: Determine Expected Contribution Toward Premiums

The ACA imposes a sliding scale percentage of income on which households must pay for their premiums.

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Step 3: Compute the Premium Tax Credit

The amount of subsidy is computed as:

Subsidy=Benchmark Plan Cost−Expected Household Contribution\text{Subsidy} = \text{Benchmark Plan Cost} - \text{Expected Household Contribution}Subsidy=Benchmark Plan Cost−Expected Household Contribution

• The benchmark plan is the second-cheapest Silver plan available in your location.
• The contribution that is anticipated is according to FPL percentage..³

‍Example Calculations

Let's examine in-depth examples with various household incomes and plan expenses.

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Example 1: Single Individual with $20,000 Income (~133% FPL)

• FPL %: $20,000 ÷ $15,060 ≈ 133% FPL
• Expected Contribution: 2.07% of income
• Benchmark Plan Cost: $5,500 annually
• Expected Payment:2.07%×20,000=4142.07\% \times 20,000 = 4142.07%×20,000=414
• Subsidy Amount:5,500−414=5,0865,500 - 414 = 5,0865,500−414=5,086
• Monthly Subsidy:5,086÷12=423.835,086 \div 12 = 423.835,086÷12=423.83

✅ This person gets $423.83/month in subsidies and pays only  $34.50/month premiums.

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Example 2: Family of Four with $60,000 Income (~192% FPL)

• FPL %: $60,000 ÷ $31,200 ≈ 192% FPL
• Expected Contribution: 4.14% – 6.52% of income
• Benchmark Plan Cost: $15,000 annually
• Expected Payment Range:4.14%×60,000=2,4844.14\% \times 60,000 = 2,4844.14%×60,000=2,4846.52%×60,000=3,9126.52\% \times 60,000 = 3,9126.52%×60,000=3,912
• Subsidy Amount Range:15,000−2,484=12,51615,000 - 2,484 = 12,51615,000−2,484=12,51615,000−3,912=11,08815,000 - 3,912 = 11,08815,000−3,912=11,088
• Monthly Subsidy Range:12,516÷12=1,04312,516 \div 12 = 1,04312,516÷12=1,04311,088÷12=92411,088 \div 12 = 92411,088÷12=924

✅ This family gets $924 – $1,043/month in subsidies, and their premium is $207 – $326.

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Example 3: Person earning  $75,000 Income (~500% FPL)

• FPL %: $75,000 ÷ $15,060 ≈ 498% FPL
• Expected Contribution: Capped at 8.5% of income
• Benchmark Plan Cost: $7,500 annually
• Expected Payment:8.5%×75,000=6,3758.5\% \times 75,000 = 6,3758.5%×75,000=6,375
• Subsidy Amount:7,500−6,375=1,1257,500 - 6,375 = 1,1257,500−6,375=1,125
• Monthly Subsidy:1,125÷12=93.751,125 \div 12 = 93.751,125÷12=93.75

✅ This person receives $93.75/month in subsidies and pays $531.25/month in premiums.

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Other Considerations

How to get the Subsidy

1. Advance Premium Tax Credit (APTC) – Paid each month to lower premium payments..
2. Claim at Tax Time –  If income is less than projected, you can receive extra subsidies when you file your taxes.
3. Repayment if Overestimated –If your income is more than anticipated, you can pay back some of the subsidy when you file your taxes.

Adjusting Subsidies Mid-Year

If you lose income (e.g., losing a job), you can report changes to the marketplace to raise your subsidy immediately and lower your premium payments..³

Key Takeaways

• Subsidies are determined by income, household size, and the local benchmark Silver plan.
• Smaller households with lower incomes get bigger subsidies.
• The subsidy cliff (400% FPL limit) has been eliminated until 2025, so even wealthy households can be eligible if premiums are high.
• Estimating your income accurately will prevent you from making huge payments or losing out on subsidies.
  
  

For an exact figure, use the KFF Health Insurance Marketplace Calculator..²