What are premium tax credits and how do they work?
Premium tax credits reduce your premium for most Marketplace plans. The amount of the tax credit you may receive depends on your income and the cost of Marketplace health plans in your area. The Marketplace will determine the expected contribution you are required to pay toward the premium for a mid-range (Silver) benchmark plan. The expected contribution will increase on a sliding scale based on your 2026 income, with more financial assistance for enrollees with lower incomes and less for those with higher incomes.
The difference between the premium for the benchmark plan and your expected contribution equals the amount of your tax credit. (You do not have to pay more than the actual premium for the plan.) You can use that amount to help pay the premium for any Bronze, Silver, Gold, or Platinum plan offered in the Marketplace. The credit cannot be used to pay for a Catastrophic plan. You can use this Marketplace subsidy calculator to estimate the premium tax credit amounts that apply to you.
Premium tax credits may be claimed at the end of the year, or you can apply for an advance premium tax credit based on your estimated income for the upcoming year. If you elect to receive an advance credit, the government will pay the credit directly to your insurance company each month and the insurer will bill you for the rest of the premium (if you owe an additional amount).
If you do not know for sure what your income for the coverage year will be when you apply, provide your best estimate. Later, when you file your tax return, the IRS will compare your actual income to the amount of premium tax credit you claimed in advance. If you underestimated your income and claimed too much premium tax credit, you will have to repay all of the difference paid on your behalf to the IRS when you file your federal income tax return next year. If you didn’t receive all of the premium tax credit you were entitled to during the year, you can claim the difference when you file your tax return. Report any changes in your income during the year to the Marketplace, so your credit can be adjusted and you can avoid any significant repayments at the end of the year.