Affordable Care Act Premium Tax Credits and are NOT available to people eligible for Health First Colorado (Medicaid) or Medicare or who have affordable coverage through an employer.
In 2025, affordable coverage is defined as coverage for employee and family members costing no more than 9.02% of household Modified Adjusted Gross Income (MAGI)*. That is an increase from 8.39% of household income in 2024.
For employees, affordability is determined by considering the premium that the employee would have to pay for the lowest-cost self-only plan offered by the employer that meets the minimum value standard. For plan year 2025, an employer plan is unaffordable if the premium the employee is responsible for is over 9.02% of the employee’s household income.
If an individual’s offer of coverage extends to their family, the plan’s affordability for the employee’s family members is determined by the family premium, not the employee’s self-only premium. The affordability calculation for family members will be unaffordable if the premium for the entire family exceeds 9.02% of the family’s household income.
Because a plan’s affordability is determined separately for the employee and their family members, an employee’s Advance Premium Tax Credit (APTC) eligibility may differ from their family members. If the offer of individual coverage is affordable for the employee, but the family offer is not affordable for the family, the employee will not be eligible for APTC, but their family members will be. If the employee and their family members choose to enroll in a marketplace plan, the employee will not receive APTC, but their family members will receive the APTC. As such, some consumers may choose to enroll in their individual job-based coverage, while their family members enroll in a Marketplace plan.
Please note that the cost to cover non-dependent family members will not be taken into consideration. So for example, young adults can remain on a parent’s health plan until they turn 26, but are generally not considered a tax dependent for the last few years of that window. Tax dependents generally must be younger than 19 years old or be a full time student younger than 24 years old, as of the end of the calendar year. There is no age limit if child is “permanently and totally disabled.”
Finally, if the employer plan does not cover “minimum value” then the employee could be eligible for the Advanced Premium Tax Credit. A health plan meets the Minimum Value standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population. Most comprehensive health insurance plans will meet this standard.
Example One
- Employee’s monthly household income = $4,083
- 9.02% of the employee’s monthly household income = $368
- Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $300
- Is the plan affordable? YES. The employee’s share of the lowest cost self-only plan ($300) is less than 9.02% of the employee’s household income ($368).
Example Two
- Employee’s monthly household income = $2,333
- 9.02% of the employee’s monthly household income = $210
- Monthly cost to the employee of the lowest-priced plan the employer offers for self-only coverage = $275
- Is the plan affordable? NO. The employee’s share of the lowest-cost self-only plan ($275) is more than 9.02% of the employee’s household income ($210), so they can get an APTC, so long as the employer plan meets Minimum Value.
* To determine household income, use Gross Income (Box 1) from the W2. Add all gross incomes for the tax household together to get the household income. In addition to any gross W2 income, include any additional income (self-employment, rental properties, taxable investment income, etc) that contributes to your federal Adjusted Gross Income (AGI), plus any excluded foreign income, nontaxable Social Security benefits (including tier 1 railroad retirement benefits), and tax-exempt interest received or accrued during the taxable year. Do not include Supplemental Security Income (SSI).
Disclaimer: Always seek guidance from a qualified tax professional for all tax related matters.
