Definition and rules relating to applicable taxpayers, coverage months, and qualified health plan

(A) In general The term “applicable taxpayer” means, with respect to any taxable year, a taxpayer whose household income for the taxable year equals or exceeds 100 percent but does not exceed 400 percent of an amount equal to the poverty line for a family of the size involved.

[(B) Repealed. Pub. L. 119–21, § 71302(a) , July 4, 2025 , 139 Stat. 322 ]

(C) Married couples must file joint return If the taxpayer is married (within the meaning of section 7703) at the close of the taxable year, the taxpayer shall be treated as an applicable taxpayer only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year.

(D) Denial of credit to dependents No credit shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins.

(E) Temporary rule for 2021 through 2025 In the case of a taxable year beginning after December 31, 2020 , and before January 1, 2026 , subparagraph (A) shall be applied without regard to “but does not exceed 400 percent”.

For purposes of this subsection—

(A) In general The term “coverage month” means, with respect to an applicable taxpayer, any month if— (i) as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and (ii) the premium for coverage under such plan for such month is paid by the taxpayer (or through advance payment of the credit under subsection (a) under section 1412 of the Patient Protection and Affordable Care Act).

(B) Exception for minimum essential coverage (i) In general The term “coverage month” shall not include any month with respect to an individual if for such month the individual is eligible for minimum essential coverage other than eligibility for coverage described in section 5000A(f)(1)(C) (relating to coverage in the individual market). (ii) Minimum essential coverage The term “minimum essential coverage” has the meaning given such term by section 5000A(f).

(C) Special rule for employer-sponsored minimum essential coverage For purposes of subparagraph (B)— (i) Coverage must be affordable Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage— (I) consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)), and (II) the employee’s required contribution (within the meaning of section 5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer’s household income. This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee. (ii) Coverage must provide minimum value Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) and the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs. (iii) Employee or family must not be covered under employer plan Clauses (i) and (ii) shall not apply if the employee (or any individual described in the last sentence of clause (i)) is covered under the eligible employer-sponsored plan or the grandfathered health plan. (iv) Indexing In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.5 percent under clause (i)(II) in the same manner as the percentages are adjusted under subsection (b)(3)(A)(ii).

(A) Qualified health plan (i) 3 3 See Amendment of Subsection (c)(3)(A) note below. In general The term “qualified health plan” has the meaning given such term by section 1301(a) of the Patient Protection and Affordable Care Act, except that such term shall not include a qualified health plan which is a catastrophic plan described in section 1302(e) of such Act. (ii) 3 Pre-enrollment verification process required Such term shall not include any plan enrolled in through an Exchange, unless such Exchange provides a process for pre-enrollment verification through which any applicant may, beginning not later than August 1, verify with the Exchange the applicant’s household income and eligibility for enrollment in such plan for plan years beginning in the subsequent year. (iii) Exception in case of certain special enrollment periods Such term shall not include any plan enrolled in during a special enrollment period provided for by an Exchange— (I) on the basis of the relationship of the individual’s expected household income to such a percentage of the poverty line (or such other amount) as is prescribed by the Secretary of Health and Human Services for purposes of such period, and (II) not in connection with the occurrence of an event or change in circumstances specified by the Secretary of Health and Human Services for such purposes.

(B) Grandfathered health plan The term “grandfathered health plan” has the meaning given such term by section 1251 of the Patient Protection and Affordable Care Act.

(A) In general The term “coverage month” shall not include any month with respect to an employee (or any spouse or dependent of such employee) if for such month the employee is provided a qualified small employer health reimbursement arrangement which constitutes affordable coverage.

(B) Denial of double benefit In the case of any employee who is provided a qualified small employer health reimbursement arrangement for any coverage month (determined without regard to subparagraph (A)), the credit otherwise allowable under subsection (a) to the taxpayer for such month shall be reduced (but not below zero) by the amount described in subparagraph (C)(i)(II) for such month.

(C) Affordable coverage For purposes of subparagraph (A), a qualified small employer health reimbursement arrangement shall be treated as constituting affordable coverage for a month if— (i) the excess of— (I) the amount that would be paid by the employee as the premium for such month for self-only coverage under the second lowest cost silver plan offered in the relevant individual health insurance market, over (II) 1 ⁄ 12 of the employee’s permitted benefit (as defined in section 9831(d)(3)(C)) under such arrangement, does not exceed— (ii) 1 ⁄ 12 of 9.5 percent of the employee’s household income.

(D) Qualified small employer health reimbursement arrangement For purposes of this paragraph, the term “qualified small employer health reimbursement arrangement” has the meaning given such term by section 9831(d)(2).

(E) Coverage for less than entire year In the case of an employee who is provided a qualified small employer health reimbursement arrangement for less than an entire year, subparagraph (C)(i)(II) shall be applied by substituting “the number of months during the year for which such arrangement was provided” for “12”.

(F) Indexing In the case of plan years beginning in any calendar year after 2014, the Secretary shall adjust the 9.5 percent amount under subparagraph (C)(ii) in the same manner as the percentages are adjusted under subsection (b)(3)(A)(ii).