Knowing whether your benefit is affordable is key to understanding whether you should opt out or opt in to your ICHRA benefit offering. This article discusses the concept of affordability and provides a few resources on how to calculate it.
The IRS determines insurance affordability by comparing your household income to the lowest-cost silver plan available in your area. If you've been offered an HRA benefit from your company, that benefit is also considered in affordability.
If your cost for the lowest-cost silver plan exceeds 9.96% of your gross household income, the benefit is considered unaffordable and you can choose to opt out and use a premium tax credit instead.
We have a great Affordability Calculator tool that you can use to easily see if your allowance is considered affordable. You can also use the formula below to calculate if your ICHRA is affordable as well:
Lowest cost self-only silver plan - (gross salary * 0.0996)/12 = minimum single allowance considered to be affordable for 2026.
Calculation Example:
Lowest-cost self-only silver plan: $450/month
Employee gross salary: $48,000/year
Step 1:
$48,000 × 9.96% = $4,780.80/year
Step 2:
$4,780.80 ÷ 12 = $398.40/month
Step 3:
$450 − $398.40 = $51.60
Minimum affordable allowance in this example would be: $51.60 per month
How do I know if my benefit is considered affordable?
If the single-only allowance amount offered through your ICHRA benefit is greater than the number you calculated above, the benefit is considered affordable for you. You may not take a tax credit, even if you opt out of the benefit or your tax credit is larger than your allowance amount.
If the single-only allowance amount is lower than that number calculated above, then the benefit is not considered affordable for you, and you can opt-out and take a tax credit.