ICHRA Calculator
The offer, and what you would buy with it
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the monthly allowance your employer is offering through the individual coverage HRA, and the monthly premium of the Marketplace plan you would buy with it, before any credit.
- 02
Enter the lowest-cost Silver plan for self-only coverage in your area. This is the plan the affordability test uses, and it is not the same as the benchmark plan that sets the credit, so look both up separately on your Marketplace.
- 03
Enter the benchmark Silver premium for your household, the second-lowest-cost Silver plan. This one decides how large a credit you would get if you opted out, so it only matters when the offer fails the affordability test.
- 04
Add your household income and size and the plan year. The threshold is a percentage of household income divided by twelve, so a raise moves the line as surely as a change in the allowance does.
- 05
Read the verdict, then the comparison. If the offer is affordable the credit is blocked and there is nothing to compare; if it is not, the page prices taking the allowance against opting out and claiming the credit instead.
Formula
Required HRA contribution = the lowest-cost Silver self-only premium in your area − your monthly allowance, never below zero. Monthly threshold = household income × the required contribution percentage ÷ 12, using 9.96% for plan year 2026 and 10.22% for 2027. The offer is affordable when the required contribution is at or below that threshold, and an affordable offer blocks the premium tax credit. Your cost with the allowance = (plan premium − allowance) × 12, never below zero. Your cost if you opt out = plan premium × 12 − the premium tax credit, where the credit is the benchmark Silver premium × 12 less household income times the applicable percentage, and zero above 400% of the poverty line. Opting out is only available when the offer is unaffordable. The allowance at which the answer flips = the lowest-cost Silver self-only premium − the monthly threshold.
Example
An employer offers a household of 2 with $55,000 of income an allowance of $500 a month for plan year 2026. The employee would buy a $640 plan, the lowest-cost Silver self-only plan in the area is $660 and the benchmark is $700. The required HRA contribution is $660 less $500, or $160 a month, against a threshold of $457, which is 9.96% of $55,000 divided by twelve. The offer is therefore affordable, the premium tax credit is blocked, and the only route is to take the allowance and pay $140 a month, or $1,680 for the year. Opting out would mean paying the full $7,680 with no allowance and no credit. The offer would turn unaffordable at an allowance below $204 a month: at $200 the required contribution is $460 against the $457 threshold, the offer fails, and opting out to claim a $3,590 credit costs $4,090 for the year against $5,280 with the allowance, so opting out is $1,190 better.
Definitions
- ICHRA
- An individual coverage health reimbursement arrangement: an employer-funded allowance used to buy your own individual health insurance, instead of being offered a group health plan.
- Required HRA contribution
- The lowest-cost Silver self-only premium in your rating area minus your monthly allowance. This is the figure the affordability test measures, not the premium of the plan you actually choose.
- Lowest-cost Silver plan
- The cheapest Silver plan for self-only coverage in your area. Used only for the ICHRA affordability test, and usually a different plan from the benchmark.
- Opt out and waive
- Formally declining the HRA and giving up future reimbursements from it. Only permitted when the offer is unaffordable, and required before you may claim a premium tax credit.
- Minimum essential coverage
- Coverage that counts for these rules. Being treated as eligible for it, which an affordable HRA offer does, is what blocks the premium tax credit.
Good to know
What an ICHRA is, and what the allowance actually does
An individual coverage health reimbursement arrangement, usually shortened to ICHRA, is an alternative to being offered a group health plan. Instead of choosing a plan on your behalf and paying most of its premium, your employer gives you an allowance and you buy your own individual coverage, typically on the Marketplace. The employer reimburses your premium, and sometimes other qualifying medical costs, up to the allowance. For employers the appeal is a predictable, fixed cost rather than an unpredictable group premium that rises each year. For employees it means a much wider choice of plan and coverage that belongs to you rather than to the job, so it does not end the day the job does. Several features are worth knowing. The money is employer money throughout: reimbursements for premiums and qualifying medical expenses are not taxable wages, which is part of why employers use this structure. That also means it is not yours to keep. An HRA reimburses what you actually spend on coverage, so if the allowance exceeds your premium the surplus is not paid to you in cash, which is why this page reports your cost after the allowance as never less than zero. You must be enrolled in individual health insurance coverage to use it at all, and you must be able to substantiate that enrolment. Allowances may vary by class of employee, such as full-time against part-time, and by age and family size, within rules designed to prevent employers steering less healthy staff towards the individual market. The rule that this page exists for is the interaction with the premium tax credit, and it is the part that most often surprises people. Accepting an ICHRA is not simply a choice about where the money comes from. Depending on the size of the allowance relative to your income, the offer itself can remove your eligibility for a credit you would otherwise have received, whether or not you take the money.
The affordability test the regulation actually sets
The test lives at 26 CFR 1.36B-2(c)(5)(i), and its shape is similar to the employer-plan test but its inputs are different in a way that matters. An HRA integrated with individual health insurance coverage is affordable for a month if the employee's required HRA contribution for that month does not exceed one twelfth of household income multiplied by the required contribution percentage, which is 9.96% for plan year 2026 and 10.22% for 2027. The required HRA contribution is defined at (c)(5)(ii) as the excess of the monthly premium for the lowest cost silver plan for self-only coverage of the employee offered in the Exchange for the rating area in which the employee resides, over the monthly self-only HRA amount. Read that carefully, because two details catch people out. First, the plan used is the lowest-cost Silver plan for self-only coverage in your area, which is not necessarily the plan you buy and is not the benchmark plan. Second, it is self-only, so the calculation runs on a single person's premium even if you are covering a family, while the income figure remains household income. On this page's example the lowest-cost Silver self-only premium is $660 a month and the allowance is $500, so the required contribution is $160. The threshold is $55,000 times 9.96%, divided by twelve, which is $457. Since $160 is well below $457, the offer is affordable. The page also solves for the point where the verdict changes: at this income the offer turns affordable at an allowance of $204 a month, so anything above that blocks the credit and anything below leaves the door open. That line moves with income as well as with the allowance, because the threshold is a percentage of income, so a raise can turn an unaffordable offer into an affordable one without the employer changing anything. The regulation adds further refinements for part-year periods and for amounts carried over from a prior year, which do not affect a simple full-year case.
Opting out, and when you are allowed to
The consequence of the affordability test is set out at 26 CFR 1.36B-2(c)(3)(i)(B), and it is worth stating precisely because the wording does more work than a summary suggests. An employee offered an HRA integrated with individual coverage is treated as eligible for minimum essential coverage, and therefore cannot claim a premium tax credit, for any month in which either the HRA is affordable under the test above, or the employee does not opt out of and waive future reimbursements from it. The same provision adds that an HRA which is affordable is treated as providing minimum value, so that second half of the employer-plan test does not need separate consideration here. Two rules follow. If the offer is affordable, the credit is blocked and no action you take restores it. Opting out of an affordable offer does not help: you simply end up paying the full premium with neither the allowance nor a credit. In this page's example that would mean paying $7,680 a year instead of $1,680, which is why the page reports no comparison at all in that case and says plainly that taking the allowance is the only route. If the offer is unaffordable, you have a genuine choice. You may accept the allowance, or you may opt out and waive future reimbursements and claim the premium tax credit instead. The waiver is a formal step and it matters: simply declining to spend the allowance does not restore your eligibility, because the regulation requires you to opt out of and waive future reimbursements. Employers offering an ICHRA must provide a notice explaining the arrangement and the opt-out right, normally at least 90 days before the plan year begins, and that notice is where the procedure for opting out will be described. One protection is worth knowing: under (c)(5)(iv), if the Exchange determines when you enrol that the HRA is not affordable for your period of enrolment, that determination generally stands even if the figures later look different.
Two Silver plans, doing two different jobs
The single most common error in working out an ICHRA is using one Silver premium for both halves of the calculation, and it produces a wrong answer in both directions, which is why this page insists on two separate fields. The affordability test uses the lowest-cost Silver plan for self-only coverage in your rating area. The premium tax credit, if you are able to claim it, is calculated from the benchmark plan, which is the second-lowest-cost Silver plan available to your household. These are different plans by definition and they cover different people, since one is self-only and the other is sized to your household. In this page's example they are $660 and $700 a month respectively. When the offer fails the test, the comparison is straightforward and the page runs it. Reducing the allowance in that example to $200 a month makes the required contribution $460 against the $457 threshold, so the offer fails by a small margin. Taking the allowance leaves $440 a month, or $5,280 for the year. Opting out and claiming the credit, which is worth $3,590 against the $700 benchmark, leaves $4,090 for the year. Opting out is $1,190 better, and the page says so. It is worth noticing how narrow the margin on the test itself was: three dollars a month of required contribution separated a blocked credit from an open one, and a slightly larger allowance would have left this household worse off. That is a genuine feature of the rule rather than a quirk of the example, and it is the reason to run the numbers rather than assume a bigger allowance is always better. Two practical points close this out. The credit disappears above 400% of the poverty line, so at higher incomes there may be nothing to opt out for even when the offer is unaffordable, and the page says so when that applies. And the figures here are only as good as the premiums you enter: the Marketplace for your area is the authority on what the lowest-cost and benchmark Silver plans actually cost, and your employer's ICHRA notice is the authority on the allowance and how to opt out.
Frequently asked questions
What will I actually pay after the ICHRA allowance?
The plan premium less the allowance. On this page's example a $500 allowance against a $640 plan leaves $140 a month, or $1,680 for the year. If the allowance is larger than the premium you pay nothing, though an HRA only reimburses what you actually spend, so the surplus is not paid to you as cash.
Is my ICHRA offer affordable, and who decides?
The regulation does, at 26 CFR 1.36B-2(c)(5). The offer is affordable if the lowest-cost Silver self-only premium in your area, minus your monthly allowance, is no more than one twelfth of your household income times the required contribution percentage, which is 9.96% for 2026. In the example that is $660 less $500, or $160 a month, against a threshold of $457, so the offer is comfortably affordable.
Can I turn down the ICHRA and take a premium tax credit instead?
Only if the offer is unaffordable. Under 26 CFR 1.36B-2(c)(3)(i)(B) an affordable HRA offer makes you eligible for minimum essential coverage, so the credit is blocked whether or not you take the money. When it is unaffordable you may opt out and waive future reimbursements, and claim the credit. Running the example with a $200 allowance makes the required contribution $460 against a $457 threshold, so the offer fails, and opting out costs $4,090 for the year against $5,280 with the allowance, which is $1,190 better.
Why does the page ask for two different Silver premiums?
Because two different Silver plans are doing two different jobs, and this is the detail people most often get wrong. The affordability test uses the lowest-cost Silver plan for self-only coverage, $660 a month in the example. The credit itself is set by the second-lowest-cost Silver plan for your household, the benchmark, at $700. They are rarely the same number, and using one for the other gives the wrong verdict.
At what allowance does the answer flip?
In the example, at $204 a month. Above that the offer is affordable and the credit is blocked; below it the offer fails the test and opting out becomes possible. The page shows the line moving as the allowance changes, and it moves with income too, because the threshold is a percentage of household income rather than a fixed amount.
Is the allowance taxable income?
No. An individual coverage HRA is funded entirely by the employer and reimbursements for premiums and qualifying medical costs are not taxable wages, which is part of why employers use them. That also means the money is not yours to keep: it reimburses what you spend on coverage, and anything you do not use stays with the employer. Your plan documents set out exactly what it will reimburse.