Does Form 1095-A Reduce Your Tax Refund?

Yes, Form 1095-A can reduce your tax refund, though the form itself is only an information return. The refund hit comes from the reconciliation it triggers: when you file, the IRS compares the advance subsidy your insurer already received to the Premium Tax Credit your final income actually qualifies you for, and any overpayment is subtracted from your refund or added to your balance due. For the 2026 tax year the exposure is larger than it has been in years, because Congress let the repayment caps expire and restored the hard income cutoff at 400 percent of the federal poverty level.

Why the Form Triggers a Refund Adjustment

If you received any Advance Premium Tax Credit during the year, you must file Form 8962 with your return, even if you otherwise wouldn’t be required to file at all.¹ Form 8962 recalculates your credit using your actual year-end income and household size, then compares that figure to the advance payments reported in Column C of your 1095-A.

Two outcomes are possible. If your final credit is larger than what was paid in advance, the difference is refundable and either increases your refund or offsets other tax owed.² If the advance payments were larger than your final credit, you have “excess APTC,” which is added to your tax liability on Schedule 2 of Form 1040. That excess reduces your refund dollar for dollar or increases what you owe.³

What Causes Advance Payments to Be Too High

The most common reason people end up owing is simple: income came in higher than the estimate they gave the Marketplace at enrollment. A raise, a spouse going back to work, selling an investment, or converting a traditional IRA to a Roth can all push income above the projection. The Marketplace keeps paying subsidies at the old level all year because it has no way to see those changes in real time.

Household size changes work the same way. If you listed a dependent on your Marketplace application and that person later filed their own return, your household shrank and your credit likely dropped. Gaining a dependent mid-year can push your credit up.

Income the Marketplace Doesn’t See

Eligibility is based on Modified Adjusted Gross Income, which starts with the AGI on line 11 of Form 1040 and adds back tax-exempt interest, nontaxable Social Security benefits, and foreign earned income excluded on Form 2555.⁴ Municipal bond interest and the nontaxable portion of Social Security are the categories people most often forget to include when estimating income, and leaving them out produces exactly the kind of mismatch that creates excess APTC at tax time.

The Employer Coverage Trap

Getting advance payments from the Marketplace does not mean you were eligible for the credit. For any month you claim it, you must not have been eligible for other qualifying coverage, including affordable employer-sponsored insurance that meets minimum value standards, Medicare, Medicaid, or TRICARE.⁵ For 2026, employer coverage is “affordable” if your share of the self-only premium is no more than 9.96 percent of household income.⁶ Someone who declines affordable employer coverage, enrolls through the Marketplace with advance payments, and then discovers at tax time that the employer plan technically qualified has to repay the entire subsidy.

Married Filing Separately

Married couples generally must file jointly to claim the Premium Tax Credit. Filing separately eliminates eligibility, which means every dollar of advance payments becomes excess APTC you must repay.⁵ A narrow exception exists for victims of domestic abuse or spousal abandonment, with the conditions laid out in the Form 8962 instructions.

2026 Changes That Make Repayment Bigger

From tax years 2021 through 2025, the IRS capped excess APTC repayment for lower-income households, with the ceiling ranging from a few hundred dollars to a few thousand depending on income and filing status. Those caps are gone for the 2026 tax year. Every dollar of excess advance payment must now be repaid, regardless of income.⁶

The practical change is substantial. A household earning below 200 percent of the federal poverty level might previously have owed back only $350 to $750 no matter how large the overpayment was. Now the same household owes the full amount. If the Marketplace overpaid your insurer by $3,000, your refund shrinks by $3,000.

The 400% FPL Cliff Is Back

From 2021 through 2025, Congress temporarily removed the income ceiling for the Premium Tax Credit so that households above 400 percent of the federal poverty level could still get a reduced subsidy. That expansion expired at the end of 2025.⁶ For the 2026 tax year, crossing 400 percent of FPL means zero Premium Tax Credit, not a smaller one. For a single person, that threshold is $63,840; for a family of four, it’s $132,000.⁷ A household that estimated income below the line but ends up above it must repay every cent of advance payments, with no cap to soften the blow.

When Your Refund Is Protected

In most states, the Premium Tax Credit requires household income of at least 100 percent of the federal poverty level. If you estimated income at or above that line when you enrolled and your actual income comes in lower, the IRS generally will not require repayment, as long as you did not intentionally or recklessly inflate your income to qualify for subsidies.⁸ This protection survived the elimination of repayment caps. If the IRS concludes you knowingly overstated income to get advance payments, the credit can be denied and full repayment demanded.

Shared Policies and Split Households

When one Marketplace policy covers people who file in different tax households, which happens often with divorced parents sharing a child’s coverage or young adults on a parent’s plan who file independently, the premiums, benchmark amounts, and advance payments on the 1095-A have to be allocated between the households on Form 8962. The allocation can be set by agreement in most situations, with specific default rules when the parties don’t agree.⁹ Getting this wrong leaves one household absorbing someone else’s repayment, so coordinate with the other filer before either return is submitted.

If the Numbers on Your 1095-A Look Wrong

You can’t correct a 1095-A yourself. If the premium, benchmark, or advance payment figures look off, contact the Marketplace that issued the form. For federal Marketplace plans, call 800-318-2596.¹⁰ The Marketplace will investigate and, if the data was wrong, issue a corrected form and send updated information to the IRS.¹¹ Wait for the corrected form before filing. If you’ve already filed and then discover an error, you’ll need to amend using Form 1040-X with a revised Form 8962. Purely demographic errors like a misspelled name do not require a corrected form; you can fix those on your return.

Skipping Form 8962 Backfires

Leaving Form 8962 off your return doesn’t avoid the repayment. The IRS will either reject the return or send a notice asking for the missing form, and your refund stays frozen until the reconciliation is complete.² The longer-term consequence is worse. If you fail to file and reconcile, the Marketplace will cut off advance premium assistance for future years. You’d still be enrolled, but you’d owe the full unsubsidized premium every month until you go back and file the overdue Form 8962.¹² With repayment caps gone for 2026, the temptation to skip the form may grow, but you’d end up owing the full excess APTC anyway and losing future subsidies in the meantime.

1
Internal Revenue Service. Instructions for Form 8962 (2025) – Section: Who Must File
2
Internal Revenue Service. Questions and Answers on the Premium Tax Credit
3
Internal Revenue Service. Premium Tax Credit – Claiming the Credit and Reconciling Advance Credit Payments
4
Internal Revenue Service. Modified Adjusted Gross Income
5
Internal Revenue Service. Eligibility for the Premium Tax Credit
6
Internal Revenue Service. Updates to Questions and Answers About the Premium Tax Credit
7
U.S. Department of Health and Human Services. 2026 Poverty Guidelines – 48 Contiguous States
8
Centers for Medicare & Medicaid Services. Are Consumers Required to Pay Back All of Their Advance Payments of the APTC if Their Household Income Ends Up Below 100% FPL
9
Internal Revenue Service. Instructions for Form 8962 (2025)
10
Internal Revenue Service. Corrected, Incorrect or Voided Form 1095-A
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Centers for Medicare & Medicaid Services. How Can I Help My Clients Make Corrections to Their Form 1095-A
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Centers for Medicare & Medicaid Services. What Does Failure to File and Reconcile Mean