Buying health coverage through the Marketplace changes your taxes in one main way: it triggers the premium tax credit, a refundable subsidy you have to reconcile on your federal return. If you took the credit in advance to lower your monthly premium, you’ll settle up with the IRS at filing time using Form 8962 and the Form 1095-A the Marketplace mails you. For the 2026 tax year, that reconciliation carries more risk than it did during the pandemic-era expansion: the 400% federal poverty level income cap is back, and the caps that used to limit how much you could be asked to repay are gone.
What the Premium Tax Credit Does
The premium tax credit offsets the cost of a Marketplace plan. The IRS looks at the “benchmark plan” in your area, which is the second-lowest-cost silver plan available to your household, decides how much of your income you’re expected to contribute toward that benchmark, and the credit covers the gap.1Office of the Law Revision Counsel. 26 USC 36B – Refundable Credit for Coverage Under a Qualified Health Plan
You can take the credit two ways. Have it paid in advance each month directly to your insurer, which lowers your out-of-pocket premium during the year. Or pay full price each month and claim the entire credit when you file.2HealthCare.gov. How to Save on Your Monthly Insurance Bill With the Premium Tax Credit Most people take advance payments because waiting a full year isn’t practical when premiums are due monthly. You can also split it, applying part in advance and claiming the rest at filing time.
Pick a plan cheaper than the benchmark and the credit shrinks to match your actual premium. Pick something more expensive and you pay the difference. The credit never exceeds what you actually owe.3Internal Revenue Service. Questions and Answers on the Premium Tax Credit
The Two Forms You’ll Deal With
If you had Marketplace coverage any month of the year, two forms drive the tax side.
Form 1095-A
The Marketplace sends you Form 1095-A by mid-February. It lists your monthly premiums, the advance credits paid on your behalf, and the cost of the benchmark silver plan in your area.4HealthCare.gov. How to Use Form 1095-A, Health Insurance Marketplace Statement Don’t file your return until you have it. Without the numbers on this form, you can’t complete the reconciliation.
If anything on the 1095-A looks wrong, premium amounts off, months missing, wrong family members listed, contact the Marketplace for a corrected version. The Federally-facilitated Marketplace call center is 800-318-2596; state-based Marketplaces have their own numbers. If you already filed using incorrect data and later get a corrected 1095-A, you don’t have to amend unless the correction would lower your tax bill, but you can amend either way.5Internal Revenue Service. Corrected, Incorrect or Voided Form 1095-A
Form 8962
Form 8962 is where reconciliation happens. You transfer the information from your 1095-A, calculate your final premium tax credit based on your actual household income for the year, and compare that figure to whatever advance payments were made on your behalf.6Internal Revenue Service. The Premium Tax Credit – The Basics The form attaches to your 1040. If you received any advance credits at all during the year, filing this form isn’t optional.
Reconciling What You Received Against What You Qualified For
Advance credits are based on the income you estimated when you enrolled, so the numbers almost never line up perfectly by year’s end. Form 8962 settles the difference.
If your actual income came in lower than your estimate, your credit is larger than the advance payments you received. The difference becomes a refund or reduces your tax bill. If your income came in higher, you received more in advance than you actually qualified for, and you owe the excess back to the IRS. For 2026, there is no cap on that repayment amount regardless of your income.3Internal Revenue Service. Questions and Answers on the Premium Tax Credit
The worst-case scenario is crossing the 400% FPL threshold. If your final household income lands above 400% FPL, you lose the credit entirely and must repay every cent of advance payments received during the year.7Internal Revenue Service. Eligibility for the Premium Tax Credit For a single person in 2026, that cliff sits at $63,840. A late-year bonus, freelance payment, or capital gain can push you over without warning.
Couples who married during the year and received advance credits as individuals sometimes face a large repayment when their combined income pushes them into a higher bracket. Form 8962 includes an alternative calculation for the year of marriage that may reduce the excess. It compares what each spouse would have owed separately before the marriage to what they owe jointly. Run it both ways if you married mid-year.
What’s Different for 2026
Two changes hit this year, and both raise the stakes of reconciliation.
The 400% Income Cap Returned
From 2021 through 2025, Congress temporarily lifted the 400% FPL income ceiling. Anyone could qualify as long as the benchmark premium exceeded 8.5% of household income, no matter how high the income went. That expansion expired on January 1, 2026, and the original ACA rule is back.1Office of the Law Revision Counsel. 26 USC 36B – Refundable Credit for Coverage Under a Qualified Health Plan If your 2026 household income exceeds 400% of FPL, you get zero credit and must repay every dollar of advance payments received during the year.7Internal Revenue Service. Eligibility for the Premium Tax Credit
Expected contribution percentages also climbed. A household at 200% FPL was expected to pay 2% of income toward the benchmark in 2025. In 2026, that same household owes 6.6%. Every income band above 150% FPL faces a higher expected contribution than it did a year ago.8Internal Revenue Service. Rev. Proc. 2025-25
Repayment Caps Are Gone
Before 2026, lower-income taxpayers who received too much in advance credits had a safety net: the IRS capped how much they had to repay, from a few hundred to a few thousand dollars depending on income and filing status. That protection is gone. Public Law 119-21, enacted in July 2025, eliminated all repayment caps starting with tax year 2026.9Congress.gov. Public Law 119-21 If advance payments exceeded your actual credit by $3,000, you owe $3,000 back. No reduction based on income level.10Internal Revenue Service. IRS Updates Frequently Asked Questions on the Premium Tax Credit
Accurate income estimation matters more than it has in years. Underestimating income when you apply for Marketplace coverage can now produce a dollar-for-dollar tax bill with no cushion.
Reporting Life Changes During the Year
Advance credits are calculated from what you told the Marketplace at enrollment. Updating the Marketplace when things change keeps those payments closer to accurate and shrinks the reconciliation gap.
Income changes matter most. A new job, a raise, lost wages, or a spouse starting or stopping work can shift your household into a different subsidy range. Reporting the change lets the Marketplace adjust your advance payments up or down so you don’t face a large repayment in April. With caps gone for 2026, this is more consequential than it used to be.
Changes in family size also affect your credit. Adding a dependent by birth or adoption raises your household size and can increase your subsidy. Divorce does the opposite for the higher-earning spouse. Gaining other coverage, such as Medicare eligibility or an employer plan that meets the affordability test, can end your eligibility for the credit entirely. Continuing to accept advance payments after that point creates a repayment obligation.
Moving to a different area can change your benchmark plan and premium costs, sometimes significantly, because the Marketplace uses your location to determine available plans and prices.
Filing Requirements and the Cost of Skipping Form 8962
The single most common mistake is failing to file Form 8962 at all. If you received advance credits and don’t reconcile them on your return, the IRS blocks you from receiving advance payments the following year.11Internal Revenue Service. Reconciling Your Advance Payments of the Premium Tax Credit You’d then have to pay full-price premiums each month and claim the credit only at tax time. People who skip reconciliation often don’t realize they’ve been cut off until they try to enroll for the next year and see the full premium.
Filing requirements also tighten for married couples. You generally have to file jointly to claim the credit. The one exception: victims of domestic abuse or spousal abandonment can file separately and still claim it.7Internal Revenue Service. Eligibility for the Premium Tax Credit
Underreporting income is the other recurring problem. Because the 400% FPL cliff is back and repayment caps are gone, someone who reports $50,000 but actually earns $65,000 could lose the entire credit and face a full repayment. The IRS compares your return against W-2s, 1099s, and other income documents, so discrepancies surface quickly.
Filing with an incorrect 1095-A, without requesting a corrected version, can delay processing and trigger follow-up notices. Keep all Marketplace correspondence and tax forms for at least three years, the standard window for amended returns and most audit activity.
A Note on State Coverage Rules
The federal individual mandate penalty was eliminated starting in 2019, but several states and the District of Columbia enforce their own coverage requirements with financial penalties for going uninsured.12Internal Revenue Service. Affordable Care Act Tax Provisions for Individuals and Families Penalties vary but generally start around $950 per uninsured adult and can reach $2,800 or more for a family. Maintaining Marketplace coverage, or any qualifying coverage, satisfies the state requirement. Check your state’s tax authority for the specific rules and penalty calculations where you live.