People who don’t have health insurance from an employer plan can buy health insurance from a marketplace under the Affordable Care Act (ACA), also known as Obamacare. The monthly premiums are made affordable by a premium subsidy in the form of a tax credit calculated off of your household income relative to the Federal Poverty Level (FPL), also known as the federal poverty line, federal poverty guidelines, or HHS poverty guidelines.
The premium subsidy goes by a sliding scale. The higher your income relative to the FPL for your household size, the lower your premium subsidy is.
Modified Adjusted Gross Income (MAGI)
The income to compare against the FPL is the Modified Adjusted Gross Income (MAGI) for your household. It doesn’t matter how many family members in your household need coverage from the ACA health insurance.
There are many different definitions of MAGI in the tax code. MAGI for ACA health insurance is basically your Adjusted Gross Income (AGI) plus tax-exempt muni bond interest and untaxed Social Security benefits.
These incomes are included in your AGI, and therefore increase your MAGI for ACA health insurance:
- Wages, salaries, tips, and other employment income
- Business income
- Income from real estate rentals
- Unemployment benefits
- Pension and withdrawals from pre-tax IRAs or annuities
- Social Security benefits
- Interest, dividends, and capital gains
These above-the-line deductions are removed from your AGI and therefore reduce your MAGI for ACA health insurance:
- Pre-tax contributions to workplace retirement plans (pension, 401k, 403b, 457, etc.)
- Deductible contributions to Traditional IRAs
- HSA contributions
- Self-employment health insurance deduction
- One-half of the self-employment tax
- Pre-tax contributions to self-employment retirement plans (solo 401k, SEP-IRA, etc.)
- Student loan interest deduction
- Early withdrawal penalties on CDs
- Educator expenses
In addition, these items aren’t in the AGI but are added back to your MAGI for ACA health insurance:
The Maximum Income
Before 2021, you qualified for the premium subsidy only if your MAGI was at 400% of the Federal Poverty Level (FPL) or below. You would lose all the subsidy if your MAGI went above 400% of FPL even by $1. You would have to pay back all the premium subsidy you already received when you file your tax return with the IRS. This was known as the ACA subsidy cliff.
The law changed in 2021, which turned the sharp cliff into a gradual slope. The Inflation Reduction Act extended the change through 2025. You still qualify for a premium subsidy now if your income goes over 400% of FPL. You just qualify for a lower amount as your income goes up. See ACA Health Insurance Premium Subsidy Slope.
This gradual slope only applies through 2025. The ACA subsidy cliff is scheduled to return in 2026.
In order to see how much you qualify for the premium subsidy, you have to know where the FPL is.
The Minimum Income
In addition to the maximum income to receive the premium subsidy, there’s also a minimum income to get accepted by the ACA marketplace. If your estimated income is too low, the ACA marketplace won’t accept you. They’ll send you to Medicaid instead.
The minimum income is 138% of FPL in states that expanded Medicaid, which is the case in most states and the District of Columbia. In states that didn’t expand Medicaid, the minimum income is 100% of FPL. According to a map from KFF, these states haven’t expanded Medicaid:
- Wyoming
- Wisconsin
- Kansas
- Texas
- Tennessee
- South Carolina
- Mississippi
- Alabama
- Georgia
- Flordia
However, unlike the maximum income, the minimum income is only evaluated at the time of open enrollment (or special enrollment), not at the time when you file your tax return with the IRS.
If your estimated income at the time of enrollment is below the minimum, the ACA marketplace won’t accept you, and they will refer you to Medicaid. If your estimated income at the time of enrollment is above the minimum and they accepted you, but your income for the year ended up below the minimum due to unforeseen circumstances, as long as you made the original estimate in good faith, you are not required to pay back the premium subsidy you already received.
The FPL Numbers
Here are the FPL numbers for coverage in 2023, 2024, and 2025. They increase with inflation every year in January. These are applied with a one-year lag. Your eligibility for a premium subsidy for 2024 is based on the FPL numbers announced in 2023. The new numbers announced in 2024 will be used for coverage in 2025.
There are three sets of numbers. FPLs are higher in Alaska and Hawaii than in the lower 48 states and Washington DC.
48 Contiguous States and Washington DC
Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
---|---|---|---|
1 | $13,590 | $14,580 | $15,060 |
2 | $18,310 | $19,720 | $20,440 |
3 | $23,030 | $24,860 | $25,820 |
4 | $27,750 | $30,000 | $31,200 |
5 | $32,470 | $35,140 | $36,580 |
6 | $37,190 | $40,280 | $41,960 |
7 | $41,910 | $45,420 | $47,340 |
8 | $46,630 | $50,560 | $52,720 |
more | add $4,720 each | add $5,140 each | add $5,380 each |
Alaska
Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
---|---|---|---|
1 | $16,990 | $18,210 | $18,810 |
2 | $22,890 | $24,640 | $25,540 |
3 | $28,790 | $31,070 | $32,270 |
4 | $34,690 | $37,500 | $39,000 |
5 | $40,590 | $43,930 | $45,730 |
6 | $46,490 | $50,360 | $52,460 |
7 | $52,390 | $56,790 | $59,190 |
8 | $58,290 | $63,220 | $65,920 |
more | add $5,900 each | add $6,430 each | add $6,730 each |
Hawaii
Household Size | 2023 coverage | 2024 coverage | 2025 coverage |
---|---|---|---|
1 | $15,630 | $16,770 | $17,310 |
2 | $21,060 | $22,680 | $23,500 |
3 | $26,490 | $28,590 | $29,690 |
4 | $31,920 | $34,500 | $35,880 |
5 | $37,350 | $40,410 | $42,070 |
6 | $42,780 | $46,320 | $48,260 |
7 | $48,210 | $52,230 | $54,450 |
8 | $53,640 | $58,140 | $60,640 |
more | add $5,430 each | add $5,910 each | add $6,190 each |
Source:
- U.S. Department of Health and Human Services, notice 2022-01166
- U.S. Department of Health and Human Services, notice 2023-00885
- U.S. Department of Health and Human Services, coming soon
The Applicable Percentages
The FPL numbers determine one aspect of your eligibility for the premium subsidy. How much you are expected to pay when you qualify for the premium subsidy is also determined by a sliding scale called the Applicable Percentages.
The lower your MAGI is relative to the FPL for your household size, the lower you’re expected to pay as a percentage of your MAGI. This table shows the applicable percentages through 2025:
Income | 2022 – 2025 |
---|---|
< 133% FPL | 0% |
< 150% FPL | 0% |
< 200% FPL | 0% – 2% |
< 250% FPL | 2% – 4% |
< 300% FPL | 4% – 6% |
<= 400% FPL | 6% – 8.5% |
> 400% FPL | 8.5% |
We cover it in more detail in ACA Health Insurance Premium Tax Credit Percentages.
Plan Choice
The ACA marketplace offers many different plan options. They’re categorized into Bronze plans, Silver plans, Gold plans, and Platinum plans. Multiplying your MAGI by the applicable percentage determines your premium contributions toward a benchmark plan — the Second Lowest Cost Silver Plan.
You’ll pay more if you choose a more expensive plan. The annual premium you’ll pay for the plan of your choice will be:
MAGI * applicable percentage + (annual premium for the plan chosen – annual premium for the Second Lowest Cost Silver Plan)
You’ll pay less if you choose a less expensive Bronze plan.
When your MAGI is lower than 250% of FPL, in addition to having a lower applicable percentage, you also qualify for cost-sharing reductions, which lower your co-pays and out-of-pocket maximum. We cover it in more detail in Cost-Sharing Subsidy Under ACA Health Insurance.
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