Credits

How do I know if the insurance offered by my employer is "affordable"?

Understanding the affordability of employer-provided insurance

BS

Business Tax Specialist

Tax Expert

3 min read
Published on 8 months ago
/KB/static/images/health_savings_account2.jpg

Under the Affordable Care Act (ACA), employer-sponsored health coverage is considered affordable if the employee’s required contribution for self-only coverage does not exceed a specified percentage of household income for the tax year.

For 2025, the affordability threshold is based on the IRS-adjusted percentage (indexed annually), not a fixed historical rate.

Affordability Test Details

  • Self-only coverage cost: The employee’s share of the premium for individual coverage (not family coverage) is used for the affordability calculation.
  • Household income: The total income of all individuals in your tax household, as reported on your tax return.
  • Threshold: If the employee’s cost exceeds 9.78% of household income, coverage is deemed unaffordable.
  • Family members: The same test applies to family members. If the employer’s coverage is unaffordable for the employee, it is also considered unaffordable for dependents.

Relevant Tax Forms and Guidance

  • Form 1095-C: Employers with 50 or more full-time employees use this form to report health coverage offers and enrollment. You may receive this form if your employer offered coverage.
  • Publication 5187: Provides detailed guidance on ACA requirements, including affordability standards and how they affect eligibility for premium tax credits.
  • Marketplace determination: If the Marketplace determines coverage is unaffordable based on projected income, it overrides any affordability based on actual tax return income.

Source:

Publication 5187 - Affordable Care Act

Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. Tax laws and regulations may change, and individual circumstances may require professional advice from a CPA or tax attorney.

OLT Free Filing

File Your Taxes With These Updates Automatically Applied

OLT automatically applies the latest IRS rules and calculates your deductions.

Automatic tax updates Deduction calculations included

Key Takeaways

  • Understanding tax deductions can significantly reduce your tax liability
  • Keep detailed records of all tax-related expenses and documents
  • Consult with a tax professional for complex situations

Tags

Related Articles

Am I eligible to claim the foreign tax credit?
Credits 4 min read

Am I eligible to claim the foreign tax credit?

Understanding Your Eligibility for Foreign Tax Credit

I do not have a Form 1095-A, do I have to enter it to complete my return?
Credits 3 min read

I do not have a Form 1095-A, do I have to enter it to complete my return?

Understanding the Importance of Form 1095-A in Your Tax Filing

Can I take the Child Tax Credit and claim expenses for child care?
Credits 3 min read

Can I take the Child Tax Credit and claim expenses for child care?

Understanding Child Tax Credit and Child Care Expense Claims