What is the Premium Tax Credit (PTC)?
The Premium Tax Credit (PTC) is a federal tax credit that helps lower-income and middle-income individuals and families afford health insurance purchased through the ACA Marketplace (Healthcare.gov).
If you're self-employed and buy health insurance through the Marketplace, you may be eligible for the PTC—but calculating it correctly is more complicated than most people realize.
How Does the Premium Tax Credit Work?
Step 1: Advance Premium Tax Credit (APTC)
When you enroll in a Marketplace plan, you estimate your annual income. Based on this estimate, the government calculates how much Premium Tax Credit you're eligible for and pays that amount directly to your insurance company each month. This is called the Advance Premium Tax Credit (APTC).
Example: Sarah's Monthly Subsidy
Sarah's estimated income: $48,000/year
Monthly premium: $500
APTC she receives: $300/month
What Sarah pays: $200/month ($500 - $300)
Step 2: Tax Time Reconciliation (Form 8962)
When you file your taxes, you report your actual income on IRS Form 8962. The IRS calculates your actual Premium Tax Credit eligibility based on:
- Your actual Modified Adjusted Gross Income (MAGI)
- Your household size
- The Second Lowest Cost Silver Plan (SLCSP) in your area
- Your Self-Employed Health Insurance Deduction (SEHID)
The IRS then compares what you received (APTC) versus what you actually qualified for (PTC):
- If you received too much APTC → You owe money back to the IRS
- If you received too little APTC → You get a refund
Example: Sarah's Tax Surprise
Sarah's actual income: $52,000 (higher than estimated)
APTC she received all year: $300/month × 12 = $3,600
PTC she actually qualified for: $2,400
Result: Sarah owes $1,200 back to the IRS
Why Most Calculators Get This Wrong
Here's the problem: the Premium Tax Credit and the Self-Employed Health Insurance Deduction are interdependent. They create a circular calculation loop:
- Your SEHID (health insurance deduction) reduces your taxable income
- Lower taxable income means lower MAGI
- Lower MAGI means you qualify for more PTC
- But more PTC means you paid less out-of-pocket for premiums
- Which means your SEHID is smaller
- Which increases your MAGI again...
The IRS Publication 974 solves this with an iterative calculation method—you calculate both values repeatedly until they "converge" to stable numbers (usually 5-10 iterations).
Most tax software doesn't do this. They make simplifying assumptions that can cost you hundreds or thousands of dollars.
How Our Premium Tax Credit Calculator Works
FreelancerHealth implements the complete IRS Publication 974 iterative method. Here's what makes our PTC calculator different:
- Automatic SLCSP Lookup: We use official CMS 2024 data covering 48 states + D.C. (955,564+ verified records)
- IRS Iterative Method: Solves the SEHID/PTC circular dependency correctly
- Form 8962 Compliance: Results match IRS expectations for tax filing
- Real Monthly Cost: Shows what you'll actually pay after all tax impacts
- Repayment Estimates: Warns you if you'll owe money at tax time
Who Should Use This Calculator?
This Premium Tax Credit calculator is designed for:
- Self-employed individuals (freelancers, consultants, gig workers)
- Independent contractors who buy health insurance through Healthcare.gov
- Anyone receiving APTC who needs to reconcile on Form 8962
- Tax professionals who need audit-ready calculations for clients
- Qualified Small Employer Health Reimbursement Arrangements (QSEHRA)
- Individual Coverage Health Reimbursement Arrangements (ICHRA)
- Employer-sponsored coverage scenarios
If you have any of these, consult a CPA or tax professional.
Step-by-Step: How to Use the Calculator
What You'll Need:
- Filing Status: Single, Married Filing Jointly, etc.
- State & ZIP Code: Your primary residence
- Household Size: Total people on your tax return
- Covered Individuals: Number of people on your health plan
- Ages of Covered Members: Ages of everyone on the policy
- Pre-SEHID MAGI: Your Modified Adjusted Gross Income before the health insurance deduction
- Monthly Premium: What you pay for health insurance
- Monthly APTC: From your Form 1095-A (or Healthcare.gov account)
The Calculation Process:
- SLCSP Lookup: We automatically find the Second Lowest Cost Silver Plan for your age and location
- Iterative Calculation: We run the IRS Pub 974 method to solve the SEHID/PTC loop
- Final Results: You get your optimized SEHID, final PTC, and real monthly cost
- Repayment/Refund: We show if you'll owe money or get a refund at tax time
Premium Tax Credit vs APTC: What's the Difference?
| Term | When It Applies | What It Means |
|---|---|---|
| APTC (Advance Premium Tax Credit) |
Throughout the year (monthly) | The subsidy paid directly to your insurance company based on your estimated income |
| PTC (Premium Tax Credit) |
At tax time (annual) | The actual tax credit you qualify for based on your real income |
| Form 8962 | Tax filing | The IRS form that reconciles APTC (what you got) vs PTC (what you deserved) |
Common Premium Tax Credit Mistakes to Avoid
TurboTax and other software often calculate SEHID first, then PTC second. This produces incorrect results because they're interdependent. Cost of this error: $500-$2,000
If your income increases during the year but you don't update Healthcare.gov, you'll receive too much APTC and owe it back at tax time. Solution: Report income changes quarterly.
Some self-employed people don't know they can deduct health insurance premiums. This leaves money on the table AND inflates their MAGI, reducing their PTC eligibility. Cost of this error: $1,000-$3,000
2026 Premium Tax Credit Income Limits
As of January 1, 2026, the enhanced ACA subsidies have expired, and the 400% Federal Poverty Level (FPL) cap has returned. This means:
- If your income is below 400% FPL: You may qualify for Premium Tax Credits
- If your income is above 400% FPL: You are NOT eligible for any PTC
2025 Federal Poverty Level (FPL) Guidelines
- 1 person: $15,060 → 400% FPL = $60,240
- 2 people: $20,440 → 400% FPL = $81,760
- 3 people: $25,820 → 400% FPL = $103,280
- 4 people: $31,200 → 400% FPL = $124,800
Source: HHS.gov
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Calculate My PTC Now →Frequently Asked Questions
What is Modified Adjusted Gross Income (MAGI)?
MAGI is your Adjusted Gross Income (AGI) with certain deductions added back in. For Premium Tax Credit purposes, MAGI includes your AGI plus tax-exempt interest and foreign income, but excludes the Self-Employed Health Insurance Deduction (SEHID).
Do I have to pay back APTC if my income increases?
Yes, if your actual income is higher than you estimated when enrolling, you'll have to repay some or all of the APTC you received. However, repayment caps apply if your income is below 400% FPL. See Form 8962 instructions for repayment limits.
Can I take both the Premium Tax Credit and the SEHID?
Yes! This is a common misconception. You can claim both the Premium Tax Credit (Form 8962) and the Self-Employed Health Insurance Deduction (Schedule 1, Line 17). The SEHID reduces your MAGI, which can actually increase your PTC eligibility.
What if I can't find my SLCSP premium?
Your SLCSP (Second Lowest Cost Silver Plan) premium is listed on Form 1095-A (Column B) that you receive from Healthcare.gov. Our calculator automatically looks up your SLCSP based on your ZIP code and age.
Is this calculator accurate for 2026 taxes?
Yes. We implement the official IRS Publication 974 iterative calculation method and use verified CMS 2024 SLCSP data covering 48 states + D.C. Our test cases match IRS examples within $1.
Do I need to recalculate if my income changes?
Yes. If your income increases or decreases by 20% or more, you should recalculate and update your income estimate on Healthcare.gov to adjust your monthly APTC. This prevents repayment surprises at tax time.