New Premium Tax Credit for 2014

The premium tax credit is applicable for health-insurance coverage bought through an exchange. It’s available only to taxpayers with household incomes between 100 percent and 400 percent of the Federal poverty level: $11,490 to $45,960 for singles and $23,550 to $94,200 for a family of four in 2014. Folks eligible for Medicare or other Federal insurance don’t qualify. Nor do those who can get affordable insurance through their work. The credit will affect 2014 tax returns.

The amount of the tax credit is estimated when you apply through an exchange. It’s based on a percentage of modified AGI, which is the adjusted gross income plus tax-exempt interest, nontaxable Social Security benefits and tax-free foreign earned income. The lower the modified AGI, the larger the credit. Those who qualify for the credit can choose to have it be paid in advance directly to the insurance company to lower the cost of their monthly premiums.