A tax cut for American families
The passage of the Affordable Care Act will extend health coverage to millions of Americans by expanding Medicaid and creating a tax cut to help low- and middle-income individuals and families afford private coverage. This tax cut will be in the form of tax credits that can be used to offset the costs of health insurance premiums and will go into effect in 2014.
Families USA released a report, Lower Taxes, Lower Premiums: The New Health Insurance Tax Credit, that takes a closer look at these premium tax credits. The report estimates how many individuals would benefit from the new premium tax credits and the value of the dollars going to help pay for insurance.
The report finds:
An estimated 28.6 million Americans will be eligible for the tax credits in 2014; and
The total value of the tax credits that year will be $110.1 billion.
One way that the size of the tax credit that individuals and families receive will be determined is by income. The amount will be on a sliding scale based on income, so those with the lowest incomes will receive the largest tax credit. This ensures that assistance goes to those who need it the most--putting money back into struggling families’ pocketbooks and ensuring that no one has to go without health coverage due to cost.
The other way that the size of the tax credit will be determined is by the size of the family. For example, the tax credits will be available to four-person families with annual incomes (in current dollars) up to $88,200 and three-person families with incomes up to $73,240. For families struggling during these tough economic times, this will be a huge help.
Picture a four-person family with $35,000 in annual income purchasing family coverage. For illustrative purposes, imagine that a family insurance plan costs $12,000. Thanks to the tax credit, this family would only have to pay less than about 4 percent of their $35,000 family income ($1,400) to buy the $12,000 plan. They would get $10,600 in tax relief and premium assistance. Not so bad, eh? And the money is available up-front when the family buys insurance—they don't have to wait until they file taxes to be reimbursed. And, if the family didn't owe taxes or their taxes were less than $10,600, they would still get the same help purchasing coverage as a family that received a tax refund.
The tax credits will help both insured and uninsured individuals and families. This means that whether it’s a family that has been struggling to cover rising premium costs or an individual who needs help paying for coverage that has been too expensive, help is on the way.
Additionally, the report finds that this tax cut will be especially helpful for those who work for small businesses. More than half of those who will be eligible for the credit work for businesses with fewer than 100 employees.
As this key provision of the Affordable Care Act takes effect, millions of Americans will be given the peace of mind and stability that comes with knowing they have access to quality, affordable health care that they can depend on.