Updated September 2017
Household size is a key factor in determining eligibility for premium tax credits. The following questions and answers explains the rules on who counts in a household when determining eligibility for premium tax credits.
Why does household size matter when calculating eligibility for premium tax credits?
Household size is used to determine a person’s income as a percentage of the poverty line, which is a required step in determining premium tax credit eligibility. (For more information on eligibility, see Key Facts You Need to Know About: Premium Tax Credits.) Table 1 shows the poverty guidelines applied to different household sizes in the 48 contiguous states and the District of Columbia. (Alaska and Hawaii each have their own federal poverty guidelines.) A family’s income as a percentage of the poverty line is calculated by taking the family’s annual income in dollars and dividing it by the poverty guideline for its household size. For example, a married couple with two children earning $45,000 a year would use the poverty guideline for a family of four — $24,600 in 2017 — to determine the family’s income as a percentage of the poverty line. The family’s income would be 183 percent of the poverty line (FPL) in 2017. This would put them in the eligible income range for premium tax credits and cost-sharing reductions.
Federal Poverty Line Guidelines
(2017 guidelines will be used for the 2018 coverage year for PTC)
|Household Size||% of Federal Poverty Line (2017 guidelines)|
The amount that a household is eligible to receive also depends on their poverty level income. Families at different income levels are expected to contribute different percentages of their income towards premium payments (see Table 2), with higher income families paying a greater percentage of their income towards premiums than lower income families.
Expected Premium Contribution Based on Income (for 2018 coverage)
|Annual Household Income
(% of FPL)
|Expected Premium Contribution
(% of income)
|Less than 133%||2.01%|
|133 – 138%||3.02 – 3.32%|
|138 – 150%||3.32 – 4.03%|
|150 – 200%||4.03 – 6.34%|
|200 – 250%||6.34 – 8.10%|
|250 – 300%||8.10 – 9.56%|
|300 – 350%||9.56%|
|350 – 400%||9.56%|
How does the marketplace determine household size for premium tax credits?
A person’s household for premium tax credit eligibility includes all the individuals in that person’s tax unit. The tax unit comprises the tax filer, the tax filer’s spouse (if married filing jointly), and any individual the tax filer claims as a dependent. Everyone in a person’s tax unit is included in the household — even family members who are not applying for coverage and those who are not eligible for premium tax credits. For example:
- Maria and Simon are married and have one child, Elaine, whom they claim as a tax dependent. They have a tax household consisting of three people and earn $35,000 a year (which is 171 percent of the poverty line in 2017). Elaine is enrolled in the Children’s Health Insurance Program (CHIP), making her ineligible for premium tax credits. However, she is still included in Maria and Simon’s household for determining premium tax credits because she is part of their tax unit. Maria and Simon have a household of three when determining their eligibility premium tax credits.
- Suppose that Maria and Simon also have an older daughter, Cora, who is 22 and living at home with her parents. Cora just graduated from college and is working full-time while living with her parents. She files her own taxes and cannot be claimed as a tax dependent by her parents. Even though Cora lives with her family, her premium tax credit household consists only of herself because she files taxes on her own and does not claim anyone as a dependent. Her parents are in a separate household of three with Elaine.
Who can be in a tax unit together?
Who can be in a tax unit together depends on a number of factors including marital status, relationship, age, residency, and who pays for living expenses. The Internal Revenue Service (IRS) has detailed rules on who can file taxes together and who can be claimed as dependent by a tax filer. For more information on tax rules, see The Health Assister’s Guide to Tax Rules.
How do you determine the household of married couples who file separate tax returns?
Married couples must file a joint tax return to be eligible for premium tax credits. Married couples who file as married filing separately are not eligible for premium tax credits except in the following cases:
- A married person qualifies to file as head of household. A person who is married but does not plan to file jointly with a spouse can sometimes qualify as Head of Household, a filing status that allows a person to be eligible for premium tax credits, rather than Married Filing Separately, which does not. In general, a person can be Head of Household if he or she is unmarried or considered unmarried (a married person is considered unmarried if he or she will live apart from his or her spouse in the last six months of the tax year) for tax purposes and pays more than half of the costs of keeping up the home for a qualifying person whom he or she will claim as a dependent.
- A married person is a survivor of domestic violence or abuse. A taxpayer who lives apart from his or her spouse and is unable or unwilling to file a joint tax return due to domestic violence will be deemed to satisfy the joint filing requirement by making an attestation on his or her tax return. Under this IRS rule, taxpayers may qualify for premium tax credits despite having the tax filing requirement of married filing separately.; or
- A married person has been abandoned by his or her spouse. A taxpayer is still eligible for premium tax credits if he or she has been abandoned by a spouse and certifies on the tax return that they are unable to locate the spouse after “reasonable diligence.”
The household of a person who qualifies for one of these exceptions includes the person and anyone he or she claims as a dependent on the tax return.
Note also that married people who file as Head of Household are always eligible for premium tax credits, but married people who are survivors of domestic abuse or have been abandoned by their spouse can only claim premium tax credits for no more than three consecutive years. (For more information on these exceptions, see the IRS rules.)
What happens when members of the family that want to buy coverage together are not in the same premium tax credit household?
People have the option to purchase individual or family policies in the marketplace. Typically, only immediate family members (e.g., parents and their children) can get coverage together through a family policy. Because the definition of a household for premium credit eligibility is based on tax rules, it does not always match the composition of the family that is able to buy coverage together. For example, the premium credit household may include an older dependent not usually treated as a family member for the purposes of family coverage, or the family may include a child under 26 who is not a tax dependent of his or her parents. In such cases, the IRS has established rules for how to allocate advance payments of the premium tax credit. For example:
- Serena lives with her son, Jacob, and her aunt, Martha, whom Serena supports. Serena is a tax filer and claims both Jacob and Martha as tax dependents. Because most insurers wouldn’t include Martha in a family plan covering Serena and Jacob, Martha will be in a separate health plan. However, even though they are covered through separate health plans, the family is still one tax unit, so their premium tax credit is determined as a household of three, and the advance payment of the premium tax credit (APTC) is applied proportionally to the two plans (see Figure 1). Even though part of the advance payment goes to Martha’s health insurer during the year, at tax time, Serena is the one who will receive the tax credit and be responsible for reconciling the entire household’s APTC, including Martha’s portion. Because Martha is a tax dependent, not a tax filer, she cannot directly receive a premium tax credit.
Example Allocation of APTC If Multiple Plans Cover One Household
|Household of 3 (SERENA, JACOB, MARTHA)|
|Plan A Enrollees: SERENA and JACOB||Plan B Enrollees: MARTHA|
- Brian and Anika are married and file taxes jointly. Their 23-year-old daughter, Olivia, lives with them. Olivia works and files her own tax return. Even though Olivia is in a different tax household from her parents, she can enroll in a plan with them because she is under 26 years old. Even if they enroll in a family plan together, the premium tax credit amount will be determined separately for each tax household (see Figure 2). Brian and Anika’s premium tax credit will be based on their income as a household of two. Olivia’s premium tax credit will be based on her income as a single household member. At tax time, Brian and Anika would file a tax return and reconcile their APTC amount and Olivia would file her own tax return and reconcile her APTC amount.
Example Plans and APTC If Multiple Households in One Family
|Household of 2 (BRIAN, ANIKA); Household of 1 (OLIVIA)|
|Plan A Enrollees: BRIAN, ANIKA, and OLIVIA|
How do mid-year changes in a person’s household affect premium tax credit eligibility?
A change in household size affects the household income level as a percentage of the poverty line, which results in a change in the premium tax credit amount for which an individual is eligible. Since premium tax credits are based on annual income, the change in household size affects premium tax credit amount for the entire year, not just for the months after the change occurs.
- For example, a married couple with a projected income of $35,000 has income at 216 percent of the poverty line. If they have a baby sometime during the year they become a household of three and their income would be 171 percent of the poverty line. This change in poverty level income will lower the household’s expected contribution from 6.90 percent to 5.00 percent of income, which will then affect the premium tax credit amount for which the household is eligible.
To ensure that individuals receive the correct premium tax credit amount for the year, household size and other changes should be immediately reported to the marketplace.
Are premium tax credit and Medicaid households the same?
No. For premium tax credits, members of a tax unit are always in the same household when determining their eligibility. For Medicaid, household size and composition are determined separately for each member of the household and may depend on more than just tax filing status; familial relationships and who physically lives in a household are also part of the determination. In some cases, Medicaid follows the premium tax household rules, but in some cases it will not.
In addition, household rules for premium tax credits are uniform across all states, but Medicaid provides some state options — such as some flexibility in the age limits for the definition of a child — that result in variability in household size depending on the state. For more information on the Medicaid household rules, see Key Facts You Need to Know About: Determining Household Size for Medicaid.
How will the marketplace determine whether to use Medicaid or premium tax credit household rules to determine eligibility?
An applicant can’t be eligible for premium tax credits if he is eligible for Medicaid. Because of this, the marketplace will first look at each individual in a tax household and determine their household and possible eligibility for Medicaid using Medicaid rules. (If the individual is assessed or determined eligible for Medicaid, he will be transferred to his state’s Medicaid agency.) If the individual is ineligible for Medicaid, then the marketplace will look at his household and eligibility for premium tax credits using premium tax credit rules.
For more information on determining household size for Medicaid, see Key Facts You Need to Know About: Determining Household Size for Medicaid.