If you've read anything about ICHRAs you've hit the word "affordability," and it probably sounded like tax law. It is. But the decision it drives is simple, and getting it right can be worth thousands of dollars a year.
Two pots of money — you can only have one
- Your ICHRA allowance — money from your employer toward your premium.
- The Premium Tax Credit (PTC) — the government subsidy that lowers Marketplace premiums based on household income.
The rule: you generally cannot receive both in the same month. If you accept the ICHRA, you must decline the tax credit. If you'd rather have the tax credit, you must opt out of the ICHRA.
The affordability test decides your options
Whether you even have a choice depends on whether your ICHRA is "affordable" under IRS rules. The test, in plain terms:
The test
Take the monthly premium for the
lowest-cost silver plan available to you (self-only, on the Marketplace, for your age and area). Subtract your
monthly ICHRA allowance. If what's left is
less than or equal to about 9.96% of your monthly household income (the 2026 figure — the IRS adjusts it each year), the ICHRA is considered
affordable.
| If your ICHRA is… | Then… |
|---|
| Affordable | You're generally not eligible for the Premium Tax Credit at all, whether you take the ICHRA or not. Accepting the ICHRA is almost always the right call. |
| Unaffordable | You have a real choice: accept the ICHRA and decline the credit, or opt out of the ICHRA and claim the credit on the Marketplace. Compare the two dollar amounts. |
How to actually compare
- Go to the Marketplace and find the lowest-cost silver plan premium for yourself. (The affordability tool below uses this number.)
- Get your allowance from your ICHRA notice.
- Estimate your household income for the year — the same number you'd put on a Marketplace application.
- Run the test. If it's unaffordable, use the Marketplace's own estimator to see what tax credit you'd get, and compare it to the allowance.
Worked example
Jordan is 34, earns $48,000, and gets a $300/mo allowance. The lowest-cost silver plan for Jordan is $560/mo.
Lowest-cost silver$560
Minus allowance−$300
Jordan's share$260
9.96% of $4,000 monthly income$398
$260 is below $398, so the ICHRA is
affordable — Jordan generally isn't eligible for a tax credit and should take the ICHRA. If the allowance were $100 instead, Jordan's share would be $460, above $398 —
unaffordable — and Jordan could opt out and compare the credit.
Important details
- The test uses the self-only silver plan even if you're covering a family, and your household income even though only you work there.
- Your employer may use your work location or your home location for the benchmark plan. Your notice typically says which.
- Affordability is figured for you. A coworker with a different income or age can land on the other side of the line with the same allowance.
- The affordability percentage changes every year. Re-run the numbers each Open Enrollment.
The expensive mistake
Taking the tax credit on the Marketplace while
also being reimbursed by an affordable ICHRA. The IRS generally reconciles this on your tax return, and you may have to pay the credit back. When you enroll on the Marketplace, answer the ICHRA questions honestly — the application walks you through it.
Run the affordability check Four numbers, one answer. Nothing leaves your device.