Strategy 98 of 107 · new for the five-year plan
Lower health premiums with a marketplace premium tax credit
What it is
If you buy your own health coverage, check the marketplace for a premium tax credit based on income.
Steps
- If you buy your own health coverage, check the marketplace for a premium tax credit based on income.
- The credit goes straight to the insurer, so the monthly premium drops.
- Send the difference to principal.
Repeat: Each open enrollment.
Measure: Monthly premium saved.
Try it in the calculator Enter its amount in "Monthly non-income amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Report income changes, or you may repay credit at tax time.
- Credit amounts change with the law.
Who it fits
Business owners, Single, Married couples, Newlyweds, Average household, No high school diploma, No college degree, Grandmas and grandpas (62 and over)
Needs
Buys own health coverage
How predictable
Most predictable: once in place, the payoff date is arithmetic
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (business owners). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: if you buy your own health coverage, check the marketplace for a premium tax credit based on income.
Suppose it brings $600 a month on principal from this strategy, not from the paycheck. The loan would be paid off in 16 years 3 months instead of 30 years, saving about $196,219 in interest. To finish in five years, they would still need about $3,374 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sources and more information
Where to get help
- CFPB: Find a HUD-approved housing counselor (free or low cost) consumerfinance.gov
- IRS: Free tax preparation for qualifying taxpayers (VITA and TCE) irs.gov
- CFPB: Submit a complaint about a lender or servicer consumerfinance.gov
Related strategies
- 97. A nonprofit credit counselor's plan to cut card rates
- 99. Children's coverage through CHIP or Medicaid
- 96. Apply for hospital financial assistance on medical bills
- 100. Free early childhood programs instead of paid daycare
- 101. Get out of required flood insurance with a FEMA map amendment
- 102. Wind-mitigation and FORTIFIED roof discounts