The Premium Tax Credit (PTC) is a refundable tax credit that helps individuals and families afford health insurance purchased through a Marketplace under the Affordable Care Act (ACA). The American Rescue Plan Act of 2021 (ARPA) introduced several temporary but impactful enhancements to this credit.

Expanded Eligibility for Taxpayers Over 400% of the Federal Poverty Level (FPL)

Before ARPA:
Taxpayers with household income above 400% of the FPL were not eligible for the PTC.

Under ARPA (2021–2022):
The income cap is eliminated. Taxpayers above 400% of the FPL can now qualify for the PTC.

Example:
A single 45-year-old with $58,000 in income (450% of FPL) would not have qualified under previous rules. Under ARPA, they may now receive a PTC of approximately $1,250.

New Percentage Tables Increase PTC Amounts

PTC is calculated based on the cost of a benchmark health plan minus the taxpayer’s required premium contribution, which is tied to household income.

ARPA Changes:

• Reduces the maximum premium contribution to 8.5% of income (from 9.83%) for 2021 and 2022.

• Expands support for those at lower income levels.

Example:
A 21-year-old at 150% of FPL may see their PTC increase from $3,500 to $4,300 under ARPA.

Special Rule for Unemployment Compensation Recipients in 2021

If you received (or were approved to receive) unemployment compensation for at least one week in 2021, the following applies:

• You automatically qualify as an eligible PTC recipient (unless you’re eligible for affordable employer coverage).

• Your household income above 133% of FPL is disregarded when calculating your PTC.

This effectively caps your required contribution and boosts your PTC, regardless of actual income above 133% of FPL.

No Repayment of Excess Advance PTC for 2020

Under normal rules, if advance PTC payments exceed the actual calculated credit, the overage must be repaid as additional income tax (subject to a cap).

ARPA Exception (2020 only):
If advance PTC exceeded your actual credit in 2020, you do not have to repay the excess.

Important Note:
If you’ve already filed your 2020 return and repaid excess credit, the IRS advises not to amend your return yet. Guidance on refund procedures is forthcoming.

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