Methodology
By Severance Calculator Editorial · Updated
PTC formula
The Premium Tax Credit for a household is the difference between the second-lowest-cost Silver plan (SLCSP) available to that household and the household's required contribution, floored at zero:
PTC_annual = max(0, SLCSP_annual − applicablePct × householdIncome)
applicablePctis a function of household MAGI expressed as a percentage of the federal poverty level (FPL) for the household's size and region. The function is defined by the §36B(b)(3)(A) applicable-percentage table, published annually by the IRS via revenue procedure. Within a bracket, the calculator linearly interpolates between the bracket's initial and final percentages.
Modified Adjusted Gross Income (MAGI)
MAGI for the Premium Tax Credit is defined at 26 U.S.C. § 36B(d)(2)(B):
MAGI = AGI
+ tax-exempt interest (Form 1040 line 2a)
+ non-taxable portion of Social Security benefits
+ foreign earned income excluded under § 911AGI itself is computed from the calculator's itemized income components minus above-the-line adjustments (HSA, deductible Traditional IRA, SEHI, one-half SE tax, SEP-IRA or Solo 401(k), student-loan interest, other).
Cliff vs smoothed regime
The American Rescue Plan Act (ARPA, 2021) and Inflation Reduction Act (IRA, 2022) temporarily replaced the pre-existing 400% FPL hard cliff with a smoothed applicable-percentage curve, capped at 8.5% for households above 400% FPL. Those enhancements expired 2025-12-31. For tax year 2026, IRS Rev. Proc. 2025-25 sets the §36B(b)(3)(A) applicable-percentage table with no row above 400% FPL — the pre-ARPA hard cliff is back.
The calculator's regime flag controls which table the engine reads. The default is cliff (current law as of 2026-05-13). If Congress passes the pending PTC extension and it applies retroactively to TY2026, the site's NEXT_PUBLIC_ACA_REGIME env var flips to smoothed and all calculator results and copy adapt automatically.
Applicable-percentage tables, side-by-side
The cliff-regime table is published in IRS Rev. Proc. 2025-25 (IRB 2025-32). The smoothed-regime table is the ARPA/IRA-equivalent placeholder pending any post-extension revenue procedure.
Cliff regime (current law)
| % FPL | Initial % | Final % |
|---|---|---|
| 100% to <133% | 2.10% | 2.10% |
| 133% to <150% | 3.14% | 4.19% |
| 150% to <200% | 4.19% | 6.60% |
| 200% to <250% | 6.60% | 8.44% |
| 250% to <300% | 8.44% | 9.96% |
| 300% to ≤400% | 9.96% | 9.96% |
| > 400% | NO PTC (hard cliff) | |
Smoothed regime (placeholder)
| % FPL | Initial % | Final % |
|---|---|---|
| 0% to <150% | 0.00% | 0.00% |
| 150% to <200% | 0.00% | 2.00% |
| 200% to <250% | 2.00% | 4.00% |
| 250% to <300% | 4.00% | 6.00% |
| 300% to <400% | 6.00% | 8.50% |
| ≥ 400% | 8.50% | 8.50% |
2025 federal poverty level (used for TY2026 PTC)
Per 26 U.S.C. § 36B(d)(2)(B), the PTC uses prior-year FPL guidelines. For tax year 2026, that means the 2025 HHS ASPE Poverty Guidelines.
| Region | HH=1 base | Per additional person |
|---|---|---|
| Contiguous 48 + DC | $15,650 | $5,500 |
| Alaska | $19,550 | $6,880 |
| Hawaii | $17,990 | $6,330 |
SLCSP estimation
The §36B(b)(3)(B) benchmark plan — the second-lowest-cost Silver plan offered in the household's rating area — is what the PTC math is built around. The calculator uses state-level age-band averages from KFF and CMS rate-filing public-use files at five reference ages (21, 30, 40, 50, 60), interpolating linearly between bands for intermediate ages. Members with employer-sponsored coverage offered or Medicare eligibility are excluded from the PTC-eligible group (but remain in the household size for FPL purposes).
Statewide averages mask significant zip-level variation — individual zips routinely deviate ±20–30% from state averages. For the actual SLCSP applicable to your specific zip, verify on healthcare.govor your state-based marketplace. The calculator's cliff distance (income-only math) remains exact regardless of SLCSP precision.
Medicaid expansion and coverage gap
Households with MAGI below 138% of FPL in Medicaid-expansion states (41 states + DC) are typically eligible for Medicaid and not the PTC. The 10 non-expansion states (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wyoming, and — by partial-via-waiver standard — Wisconsin) have variable coverage for adults below 100% FPL. In particular, in the 9 non-expansion states without a §1115 waiver, adults below 100% FPL fall into the coverage gap: they earn too much for traditional state Medicaid but too little for the PTC. Wisconsin is special-cased: BadgerCare covers adults to 100% FPL via §1115 waiver, so no coverage gap exists despite no formal expansion.
SEHI iterative deduction
The Self-Employed Health Insurance (SEHI) deduction reduces AGI by the cost of the SE taxpayer's health insurance. But the PTC also reduces the deductible amount of SEHI by the credit's value — and the PTC depends on AGI/MAGI. The two are circular. IRS Pub 974 Worksheet W provides a two-iteration convergence procedure. The calculator surfaces sehi-iterate as a ranked MAGI move when self-employment income is present; the recommendation cites the worksheet.
MFS filing status
Married Filing Separately disqualifies the PTC except under the spousal abuse / abandonment exception in 26 C.F.R. § 1.36B-2(b)(2). The calculator returns cliffStatus=stuck and an explanatory warning when MFS is selected.