SECTION 1. PURPOSE

This revenue procedure provides the 2014 monthly national average premium for qualified health plans that have a

and A’s premium tax credit is the amount determined under Step 4, $6,740.

If A chose to use the iterative calculation, the result would be the same.

Example 2 : In 2014, B, B’s spouse, and their two dependent children enroll in the applicable secondlowest-cost silver plan, with an annual premium of $14,000. B is engaged in a trade or business as a sole proprietor and has household income (before taking into account the § 162(l) deduction for specified qualified health plans) of $82,425, which includes $75,000 of earned income (within the meaning of § 401(c)) derived by B from the trade or business with respect to which the health insurance is established. B has no advance credit payments for the taxable year. B uses the alternative calculation in section 5.02 to determine the allowable § 162(l) deduction and premium tax credit as follows:

(1) Step 1. Specified premiums are $14,000 and B has no advance credit payments. B’s Step 1 household income is $68,425 ($82,425 � $14,000), which is 291 percent of the Federal poverty line for a family of 4 (applicable percentage of 9.24). B’s § 162(l) deduction is not limited under section 5.03 because B has more than $14,000 of earned income from the trade or business and B has no advance credit payments.

(2) Step 2. B’s initial premium tax credit based on household income of $68,425 is $7,678 ($68,425

• .0924 - $6,322; $14,000 � $6,322 - $7,678). (3) Step 3. B’s § 162(l) deduction is $6,322 ($14,000 - $7,678). B’s § 162(l) deduction is not limited under section 5.03 because B has more than $6,322 of earned income from the trade or business and B has no advance credit payments.

(4) Step 4. B’s household income is $76,103 ($82,425 � $6,322), which is 323 percent of the Federal poverty line for B’s family size (applicable percentage of 9.5). B’s premium tax credit based on household income of $76,103 is $6,770 ($76,103 .095 - $7,230; $14,000 � $7,230 - $6,770).

B’s allowable § 162(l) deduction is the amount determined under Step 3, $6,322, and B’s premium tax credit is the amount determined under Step 4, $6,770.

If B instead uses the iterative calculation under section 5.01, B would repeat Steps 3 and 4 using premium tax credit and § 162(l) deduction amounts in the immediately preceding iteration until changes in the credit and § 162(l) deduction between iterations are less than $1. In this case, B’s allowable § 162(l) deduction would be $7,151 and B’s premium tax credit would be $6,849.

Example 3 : Same facts as Example 2, except that B also enrolls his non-dependent, 26-year old daughter in individual market coverage not offered on an Exchange. This coverage has an annual premium of $3,000. Under § 162(l)(1)(D), B is allowed a deduction for the premiums for coverage of the nondependent 26-year old child. However, because the daughter is not a dependent, months of coverage for the daughter are not coverage months, and B may not receive a premium tax credit for B’s daughter’s coverage. B uses the alternative calculation in section 5.02 to determine the allowable § 162(l) deduction and premium tax credit as follows:

(1) Because none of the months of coverage for B’s non-dependent are coverage months, B should

apply the rule in section 4 first. Under section 4, B reduces his household income by the § 162(l) deduction he may claim for the non-dependent—$3,000— before performing any calculations in section 5 of this revenue procedure. B also does not include this portion of the § 162(l) deduction in performing either the iterative or the alternative calculation. Thus, before performing Step 1 of the alternative calculation, B begins with household income of $79,425 ($82,425 - $3,000) and specified premiums of $14,000 ($17,000 � $3,000).

(2) Step 1. Specified premiums are $14,000 and B has no advance credit payments. B’s Step 1 household income is $65,425 ($79,425 � $14,000), which is 278 percent of the Federal poverty line for a family of 4 (applicable percentage of 8.86). B’s § 162(l) deduction is not limited under section 5.03 because B has $72,000 of earned income not already offset by a § 162(l) deduction ($75,000 � $3,000 already deducted above), which is more than $14,000 and B has no advance credit payments.

(3) Step 2. B’s initial premium tax credit based on household income of $65,425 is $8,203 ($65,425

• .0886 - $5,797; $14,000 � $5,797 - $8,203). (4) Step 3. B’s § 162(l) deduction is $5,797 ($14,000 � $8,203). B’s § 162(l) deduction is not limited under section 5.03 because B has more than $5,797 of earned income from the trade or business and B has no advance credit payments.

(5) Step 4. B’s household income is $73,628 ($79,425 � $5,797), which is 313 percent of the Federal poverty line for B’s family size (applicable percentage of 9.5). B’s premium tax credit based on household income of $73,628 is $7,005 ($73,628 .095 - $6,995; $14,000 � $6,995 - $7,005). B’s allowable § 162(l) deduction is $5,797, and B’s premium tax credit is $7,005. B’s § 162(l) deduction of $5,797 may be claimed in addition to the $3,000 § 162(l) deduction for the daughter’s coverage, as described above.

If B chose to use the iterative calculation, B’s allowable § 162(l) deduction for specified premiums would be $6,891and B’s premium tax credit would be $7,109. B’s § 162(l) deduction of $6,891 would be allowable in addition to the $3,000 § 162(l) deduction for the daughter’s coverage, as described above.

Example 4 : In 2014, C, C’s spouse, and their two dependent children enroll in the applicable secondlowest-cost silver plan, with a monthly premium of $1,000. C is engaged in a trade or business as a sole proprietor and has household income (before taking into account the § 162(l) deduction for specified qualified health plans) of $82,425, which includes $18,000 of earned income (within the meaning of § 401(c)) derived by the taxpayer from the trade or business with respect to which the health insurance is established. C has no advance credit payments for the taxable year. C only operates a business from September to December. Because C is a taxpayer described in section 3 and has a premium assistance amount for one or more coverage months for premiums that are not specified premiums, section 6 applies to C. C uses the alternative calculation in section 5.02 to determine the allowable § 162(l) deduction and premium tax credit as follows:

(1) Step 1. Specified premiums are $4,000 (4 $1,000) and C has no advance credit payments. C’s

Bulletin No. 2014–33 367 August 11, 2014

bronze level of coverage for taxpayers to use in determining their maximum individual shared responsibility payment under § 5000A(c)(1)(B) of the Internal Revenue Code and § 1.5000A–4 of the Income Tax Regulations. This revenue procedure also provides an explanation of the methodology used to determine the monthly national average premium amount.