Published on March 31, 2022. Show
Each year, the federal government releases an updated federal poverty guidelines chart. This helps you understand if your household income qualifies you for several types of federal aid. However, with the passing of the American Rescue Plan, these guidelines have been adjusted. In this article, we’ll answer common questions about federal poverty guidelines, including:
What are federal poverty guidelines?The federal poverty guidelines, also known as the federal poverty level (FPL), are used to measure a household’s poverty status based on your annual income. But not just the income you take home—your FPL is based on your modified adjusted gross income. Where you fall on the FPL will change yearly because the guidelines are adjusted annually for inflation. The United States Department of Health and Human Services releases the poverty guidelines at the beginning of each year. How do you calculate the federal poverty level?The Department of Health and Human Services calculates the federal poverty guidelines based on the United States Census Bureau’s poverty thresholds released in the previous year. A poverty threshold is determined based on a family’s total income. If total household income is less than the federally set family income threshold, it’s considered to be in poverty. It’s calculated using income before taxes and is updated for inflation using the Consumer Price Index. Once the Census Bureau releases their numbers for the previous year, the Department of Health and Human Services uses this information to calculate the federal poverty level based on family size. How does the IRS use the federal poverty guidelines?The IRS uses the federal poverty guidelines to determine your eligibility for several programs, including Medicaid, premium tax credits, and others. Let’s go over each in more detail. MedicaidTo qualify for Medicaid, your income must be no more than 138% of the FPL. Depending on where you live and how many people you have in your household, that number will look slightly different for everyone. For example, if you’re a single adult living in California, you need to make less than $18,754 a year to qualify for Medicaid. However, an individual living in Hawaii will need to earn less than $21,569 to qualify. You can check the 2022 FPL guidelines chart below to see if you’re eligible for Medicaid based on your home state and household size if your state has expanded Medicaid available. Premium tax creditsAnother important use of the FPL is determining whether health insurance purchased through the federal or state-run markets is affordable and whether or not you’re eligible for premium tax credits. Premium tax credits were created by the Affordable Care Act (ACA) to help individuals pay for their marketplace health insurance premiums, either as an advance credit each month or on their tax returns. Before Congress passed the American Rescue Plan in 2021, the government only considered an insurance policy affordable if the annual cost was between 2% and 9% of your income, depending on where you fell on the FPL. You could receive a premium tax credit to lower your health insurance cost only if your income fell between 100% and 400% of the FPL. The American Rescue Plan mandates that all Americans pay no more than 8.5% of their income for health insurance. This increased the number of Americans eligible for premium tax credits and how much you can receive. For example, people who earn between 100% and 150% of the FPL are now eligible for zero-premium coverage. Before, this group had to pay 2% or more of their income toward premiums. If the federal government doesn’t extend the American Rescue Plan protections, the 8.5% cap will remain, but eligibility will return to only those with a household income between 100% and now more than 400% of the poverty level. Other programsWhile determining eligibility for Medicaid and premium tax credits are the main two reasons the IRS will use federal poverty guidelines, several other programs are available to low-income families that fall below a certain point on the FPL. Here are just a few programs you may qualify for depending on your income:
What are the current poverty guidelines for 2022?You can find the current federal poverty guidelines in the tables below, which have been split between the lower 48 states and the District of Columbia, Alaska, and Hawaii. The 48 contiguous states and D.C.
Alaska
Hawaii
Source: Poverty Guidelines, Office of the ASPE Are there other ways to save on health insurance?While these adjustments to the federal poverty guidelines have made it easier to get premium tax credits and other discounts, they don’t work for everyone. If you don’t qualify for advance premium tax credits or Medicaid, your employers may offer a benefit. Employers often offer traditional group health insurance policies, but organizations have other options. Health reimbursement arrangements (HRAs) and health stipends are smart ways to save on health coverage. Through an HRA, you can get the cost of your individual health insurance premium and other qualifying medical expenses reimbursed 100% tax-free through your employer. Take our quiz to find out which HRA is best for you and your organization A health stipend is another option for organizations of all sizes. Employers reimburse their employees for healthcare expenses much like an HRA, except the reimbursements are taxable. This allows you to coordinate a health stipend with advance premium tax credits to ensure you’re receiving the best benefit possible. See how health stipends compare to HRAs with our free comparison chart ConclusionUnderstanding federal poverty guidelines and how the IRS uses them is an important step in getting more affordable health insurance, housing, education, and more. Depending on your family size and federal poverty level, you could be eligible for benefits such as premium tax credits and Medicaid. With the changes made possible by the American Rescue Plan, more Americans have access to the care they deserve at a price they can afford. This blog article was originally published on March 17, 2021. It was last updated on March 31, 2022. Originally published on March 31, 2022. Last updated March 31, 2022. Share:
What does the US poverty line measure?Poverty is measured in the United States by comparing a person's or family's income to a set poverty threshold or minimum amount of income needed to cover basic needs. People whose income falls under their threshold are considered poor. The U.S. Census Bureau is the government agency in charge of measuring poverty.
How is the poverty line determined in the United States quizlet?The poverty level is defined by the U.S. Bureau of the Census and it is determined by calculating the cost of providing an adequate diet. This number is then multiplied by three, because research has indicated that poor people spend a third of their income on food.
What defines poverty line?The poverty line is an estimated, imaginary line developed by economists in order to define a poor person. Using certain standard measures, the poverty line is calcuated such that all poor people lie below the poverty line and any one above the poverty line is not poor.
Is poverty line expressed in dollars?It is calculated by taking the poverty threshold from each country—given the value of the goods needed to sustain one adult—and converting it into dollars. The current international poverty line is $1.90 per day.
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