A health insurance tax credit, known formally as the Premium Tax Credit, is a federal subsidy that lowers what you pay for coverage bought through the Health Insurance Marketplace. It can reduce your monthly premium right away or come back to you as a larger refund at tax time. For 2026, it’s generally available to households earning between 100% and 400% of the federal poverty level, which works out to roughly $15,960 to $63,840 for one person and $33,000 to $132,000 for a family of four.1HHS ASPE. 2026 Poverty Guidelines – 48 Contiguous States
The credit was created under 26 U.S.C. ยง 36B and is refundable, so you get the full benefit even if you owe no federal income tax.2Office of the Law Revision Counsel. 26 USC 36B – Refundable Credit for Coverage Under a Qualified Health Plan Unlike a deduction, it cuts your tax bill dollar for dollar, and any amount left over comes to you as a refund.
Who Qualifies
Eligibility comes down to income, what other coverage you have available, and your legal status.
Your household income must sit between 100% and 400% of the federal poverty level for your family size.3Internal Revenue Service. Eligibility for the Premium Tax Credit From 2021 through 2025, temporary legislation removed the 400% ceiling. That expansion has expired, and the 400% cap is back for 2026.2Office of the Law Revision Counsel. 26 USC 36B – Refundable Credit for Coverage Under a Qualified Health Plan Cross that line by even a dollar and you get no credit at all, and you owe back every advance payment you received during the year.
Access to other qualifying coverage disqualifies you. Employer-sponsored insurance counts as qualifying when the employee’s share for self-only coverage is less than 9.96% of household income for 2026 and the plan covers at least 60% of average costs.4HealthCare.gov. Affordable Coverage – Glossary People enrolled in Medicare, Medicaid, or CHIP are also ineligible. Since a 2023 regulatory fix to the “family glitch,” family members can qualify for marketplace credits when the cost of family coverage through the employer exceeds the affordability threshold, even if employee-only coverage is affordable.
The credit is available to U.S. citizens and to immigrants who are lawfully present, including green card holders, refugees, asylees, and people with valid non-immigrant visas. As of August 2025, DACA recipients are no longer eligible for marketplace coverage.5HealthCare.gov. Coverage for Lawfully Present Immigrants
A few other rules matter. Married couples generally must file jointly to claim the credit, with narrow exceptions for domestic abuse and spousal abandonment. Anyone who can be claimed as a dependent on someone else’s return cannot claim the credit on their own. Incarcerated individuals cannot enroll in a marketplace plan unless they’re awaiting trial.6eCFR. 26 CFR 1.36B-2 – Eligibility for Premium Tax Credit
2026 Income Thresholds
For the 48 contiguous states, the poverty-level benchmarks that frame the credit look like this:1HHS ASPE. 2026 Poverty Guidelines – 48 Contiguous States
- 1 person: $15,960 (100% FPL) to $63,840 (400% FPL)
- 2 people: $21,640 to $86,560
- 3 people: $27,320 to $109,280
- 4 people: $33,000 to $132,000
Alaska and Hawaii use higher guidelines. The income the marketplace looks at is your modified adjusted gross income, which starts with your adjusted gross income and adds tax-exempt interest, untaxed foreign income, and non-taxable Social Security benefits.7HealthCare.gov. What’s Included as Income Supplemental Security Income is not counted. Non-taxable Social Security benefits catch many people off guard because they don’t show up as income on a regular tax return, yet they count here and can push a household past the 400% cliff.
How the Credit Amount Is Calculated
The credit is built to cap what you spend on premiums at a set percentage of your income, and that percentage climbs as income climbs. The 2026 applicable percentages published by the IRS are:8IRS.gov. Rev. Proc. 2025-25
- Below 133% FPL: 2.10% of income
- 133% to 150% FPL: 3.14% rising to 4.19%
- 150% to 200% FPL: 4.19% rising to 6.60%
- 200% to 250% FPL: 6.60% rising to 8.44%
- 250% to 300% FPL: 8.44% rising to 9.96%
- 300% to 400% FPL: 9.96%
These percentages are meaningfully higher than the ones in effect from 2021 through 2025. Someone at 150% of the poverty level paid nothing toward premiums in 2024 but owes roughly 4% of income in 2026.
Once your expected contribution is set, the credit equals the cost of the “benchmark plan” in your area minus that contribution. The benchmark is the second-lowest-cost Silver plan available in your zip code and county.9Centers for Medicare & Medicaid Services. Second Lowest Cost Silver Plan Technical FAQs You don’t have to enroll in that plan. You can apply the same dollar credit to any Bronze, Silver, Gold, or Platinum plan you pick. Choose a plan cheaper than the benchmark and the leftover credit reduces your premium further, sometimes to zero. Choose a more expensive plan and you pay the difference.
Getting the Credit in Advance or at Tax Time
When you enroll through the marketplace, you decide how to receive the credit. Most people take advance payments, which go directly to the insurer each month and lower the bill you see. You can also decline advance payments and claim the whole credit as a lump sum on your return, though that means paying full premiums all year. Splitting the difference is allowed too.
Accuracy matters if you take advance payments. The marketplace calculates the credit from the income you estimate for the year. A raise, a lost job, or a stretch of overtime will move your actual credit away from that estimate, and the gap gets settled when you file.
Reconciling on Your Tax Return
Anyone who received advance payments has to reconcile them. Early in the year the marketplace sends Form 1095-A, which lists your monthly premiums, the benchmark plan cost, and the advance payments made on your behalf.10Internal Revenue Service. About Form 1095-A – Health Insurance Marketplace Statement You feed those numbers into IRS Form 8962, which compares what you received in advance to the credit your final income actually earns you.
If advance payments came in below your actual credit, the difference boosts your refund or reduces your tax bill. If they came in above it, you owe the excess back.
Repayment Caps Are Gone for 2026
In earlier years, households under 400% of the poverty level had a limit on how much excess advance credit they had to pay back. Starting with tax year 2026, those caps are gone.11IRS.gov. Updates to Questions and Answers About the Premium Tax Credit Full excess is owed regardless of income. A household that underestimates its income by $10,000 could face a repayment of several thousand dollars at tax time with no cushion.
If You Don’t File Form 8962
You can’t skip the reconciliation. Electronic returns filed without Form 8962 get rejected.12Internal Revenue Service. How to Correct an Electronically Filed Return Rejected for a Missing Form 8962 Paper returns will be accepted at first, then the IRS will write asking for it. Failing to reconcile also blocks you from getting advance credits or cost-sharing reductions the following year, which means paying the full unsubsidized premium until the missing form is filed.13Internal Revenue Service. The Health Insurance Marketplace
Reporting Changes During the Year
Because advance payments track an estimate, the marketplace expects you to report changes as they happen rather than at year-end.14HealthCare.gov. Which Income and Household Changes to Report The changes that move the credit include:
- Income shifts: a new job, a raise, reduced hours, or starting Social Security benefits
- Household changes: marriage, divorce, having or adopting a child, a dependent turning 26, or a death in the family
- Coverage changes: an offer of employer insurance (even if declined), gaining Medicaid or Medicare, or losing existing coverage
- Status changes: a new address, changes in disability or immigration status, or a change in tax filing status
Reporting quickly lets the marketplace adjust your advance payments in real time and shrinks the gap you’ll have to settle at tax time. With repayment caps gone in 2026, telling the marketplace about a March raise can be the difference between a small correction and a four-figure surprise the next April.
Cost-Sharing Reductions
A separate benefit, cost-sharing reductions, lowers your deductibles, copays, and out-of-pocket maximums. To get them, your income must fall between 100% and 250% of the poverty level and you must enroll in a Silver plan.15HealthCare.gov. Health Plan Categories – Bronze, Silver, Gold, and Platinum With cost-sharing reductions, a Silver plan can cover 73% to 94% of medical costs rather than the standard 70%. A typical 2026 Silver plan might have an out-of-pocket maximum around $10,600, and at the lowest income levels that cap drops to about $3,500. These reductions don’t appear on your tax return; they’re built into the plan when you enroll through the marketplace.