Assume a taxpayer is qualified to receive a premium tax credit. Explain how to calculate the amount of the credit.
What will be an ideal response?
The premium tax credit is equal to the lesser of:
• The premium for the insurance obtained from the Marketplace
• The premium for the applicable second lowest cost silver plan (SLCSP) minus the taxpayer's contribution amount.
The Marketplace premium amount and the SLCSP amount are provided to the taxpayer on a Form 1095-A provided by the Marketplace.
The taxpayer's contribution amount is determined with reference to an IRS Table (provided in Appendix B to Chapter 9). The taxpayer must first determine a percentage calculated as:
[Taxpayer household income/the Federal Poverty Level for the applicable family size]
Using that percentage, the taxpayer obtains the applicable figure from the IRS Table (in Appendix B to Chapter 9). The applicable figure is multiplied by the taxpayer's household income to determine the taxpayer's contribution amount. The contribution amount is subtracted from the SLCSP premium.
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