The IRS has published the cost-of-living adjustments for the 2024 premium tax credit in Revenue Procedure 2023-29.[1] While the applicable percentage table remains unchanged for 2024, owing to provisions in the American Rescue Plan Act that temporarily fix these values, the required contribution percentage continues to be adjusted for inflation annually.

Applicable Percentage Table

The applicable percentage is a figure used to calculate a household’s expected contribution, as a percentage of its income, for a healthcare policy that offers benefits equivalent to the second lowest cost silver plan available on the taxpayer’s exchange. If the cost of that policy exceeds the calculated percentage of the taxpayer’s household income, the taxpayer becomes eligible for a credit up to the amount of that excess, provided the taxpayer purchases qualifying coverage that costs more than the calculated amount.

If the taxpayer chooses the second lowest cost silver policy on their exchange, the credit will reduce the cost to the applicable percentage of the taxpayer’s income. If the taxpayer opts for a less expensive plan from the exchange, the credit will be adjusted so that the taxpayer’s contribution remains the applicable percentage of their household income. Conversely, if the taxpayer selects a more expensive plan from the exchange, the credit will be limited to the amount calculated based on the excess cost of the second lowest cost silver policy over the applicable percentage of the household’s income.

Although the table was originally designed to be indexed for inflation annually, it has been temporarily adjusted in favor of the taxpayer through 2025. During this period, inflation indexing has been suspended.

Section 9661 of the American Rescue Plan Act of 2021, Public Law 117-2, 135 Stat. 4, 182 (2021) (ARPA), added § 36B(b)(3)(A)(iii) to the Code to provide an Applicable Percentage Table that applies for taxable years beginning in calendar years 2021 and 2022. Section 12001(a) of the Inflation Reduction Act of 2022, Public Law 117-169, 136 Stat. 1818, 1905 (2022) (IRA) extended to taxable years beginning in calendar years 2023-2025 the Applicable Percentage Table enacted by the ARPA. Section 36B(b)(3)(A)(iii) also suspends indexing of the Applicable Percentage Table for taxable years 2021-2025.[2]

Thus, the table for 2024 remains the same as the table for 2023:[3]

Required Contribution Percentage for 2024

To qualify for the premium tax credit, a taxpayer must not have received an offer of affordable minimum essential coverage from their employer for the month in question, since eligibility for the credit is determined on a monthly basis. This percentage continues to be adjusted annually for inflation.

Section 9661 of the ARPA and § 12001(a) of the IRA did not amend the rules under § 36B(c)(2)(C)(iv) relating to the Required Contribution Percentage, including the rules relating to the indexing of the Required Contribution Percentage. See § 36B(b)(3)(A)(iii)(I). The Required Contribution Percentage for plan years beginning in calendar year 2024 is indexed based on the rates of premium growth relative to the rates of income growth in guidance issued by the Department of Health and Human Services (HHS). In addition, the additional adjustment provided in § 36B(b)(3)(A)(ii)(II) is not required for plan years beginning in 2024 because the Department of the Treasury and the Internal Revenue Service have determined that the failsafe exception described in § 36B(b)(3)(A)(ii)(III) applies for plan years beginning in calendar year 2024.[4]

The required contribution percentage for 2024 will be 8.39%.

[1] Revenue Procedure 2023-29, August 23, 2023, https://www.irs.gov/pub/irs-drop/rp-23-29.pdf (retrieved August 26, 2023)

[2] Revenue Procedure 2023-29, August 23, 2023, Footnote 1

[3] Revenue Procedure 2023-29, August 23, 2023

[4] Revenue Procedure 2023-29, August 23, 2023