What is a 'premium tax credit'?

A premium tax credit is a subsidy designed to make health insurance more affordable for individuals and families who purchase coverage through the Health Insurance Marketplace. This credit is specifically aimed at lowering the amount of money that a household pays in premiums for health insurance. It is based on the individual's or household's income and the cost of coverage in their area, making it easier for those with lower or moderate incomes to obtain necessary coverage.

The premium tax credit can be particularly significant for those who qualify, potentially reducing the cost of coverage to a more manageable level and ensuring that health insurance remains accessible. This financial assistance is a critical component of the Affordable Care Act, aimed at expanding access to healthcare for more Americans.

While other options pertain to health insurance and tax, they do not describe what a premium tax credit actually is or its purpose in helping individuals manage the costs of their premiums.