New Tax Law Extends the Expanded Obamacare Premium Tax Credit Through 2025

The Inflation Reduction Act extends the temporary exception to the 400% of FPL cap for premium tax credits through 2025.

The Patient Protection and Affordable Care Act (ACA), also called "Obamacare," ensures that affordable health insurance coverage is available to all Americans. When passed in 2010, people whose household income was between 100% and 400% of the federal poverty level (FPL) could get a premium tax credit to help them buy individual health coverage, assuming they were otherwise eligible.

Because of the COVID-19 pandemic, Congress lifted the 400% of FPL limit for 2021 and 2022. During these years, Americans who earned over 400% of the FPL didn't have to pay more than 8.5% of their household income for Obamacare health insurance. No matter how high your income was, you could get a premium tax credit to the extent the cost of the silver benchmark plan in your area exceeded 8.5% of your household income. Those with incomes under 400% of the FPL were required to pay less than 8.5% of their income for health insurance based on a sliding scale.

The old pre-2021 rules were scheduled to return in 2023. However, the Inflation Reduction Act removes the 400% of FPL limit through 2025. So, people with household incomes over that amount get three additional years to claim the premium tax credit, assuming they otherwise qualify.

Effective date: August 16, 2022