If your income last year was higher than expected, do you have to pay back some of the advance premium tax credits that you received for Marketplace coverage?

What is excess APTC?

Most people who enroll in health coverage through the Marketplace are eligible for premium tax credits – also called premium subsidies.² And most people opt to receive those tax credits in advance (thus the “advance” in APTC), meaning that the government pays the money directly to their insurance company each month, reducing the amount the enrollee has to pay in premiums.³

To clear up a potential point of confusion, it’s important to note that although APTC is often described as being “received” by the enrollee, the money is sent directly to the enrollee’s Marketplace insurance company. But excess APTC has to be repaid by the enrollee to the IRS, which may catch tax filers off guard.

The premium tax credit an enrollee receives depends on their household income (an ACA-specific calculation called modified adjusted gross income, or MAGI). Since APTC is paid in advance (rather than paid when the taxpayer claims the entire amount on their tax return), the APTC amount is based on projected income, rather than actual income. And that projection may not end up being accurate.

Once the year is over and you’re filing your tax return, your actual premium tax credit will be calculated based on your actual income, using Form 8962. That amount may not be the same as the APTC that was calculated and paid out based on the income you projected.

If your APTC was more than your actual PTC ended up being (generally meaning that you earned more than you projected), the federal government paid excess APTC on your behalf for the previous year. You’ll have to repay some or all of that excess amount to the Internal Revenue Service (IRS) when you file your tax return.

How much of the excess APTC will I have to repay?

The amount of APTC you’ll have to repay will depend on how much excess APTC was paid on your behalf, your household income, and your tax filing status.

If your household income (MAGI) is at least 400% of the previous year’s federal poverty level (FPL), you’ll have to repay all of the excess APTC. But if your household income is below that threshold, there are caps on how much excess APTC you must repay, but only for APTC paid through the end of the 2025 plan year. These caps have historically been adjusted annually by the IRS, and the 2025 limits are shown in the chart below.

But starting with APTC paid during the 2026 plan year, there will no longer be any repayment caps for excess APTC. All excess APTC will have to be repaid in full, due to H.R.1.¹

When you’re filing your 2025 tax return, if the amount of excess APTC that was paid on your behalf is less than the cap shown below, you’ll have to repay the entire amount. But if the excess APTC is more than the cap (which depends on your income and filing status), the amount you’ll have to repay will be limited by the cap.

One point of confusion that sometimes comes up here has to do with the temporary elimination of the “subsidy cliff” under the American Rescue Plan (ARP) and the Inflation Reduction Act (IRA). Under the ACA, premium subsidies are not available at all if a household’s income is over 400% of FPL. But under the ARP and IRA, households with income above 400% of FPL are eligible for subsidies through 2025 if the cost of the benchmark plan would otherwise be more than 8.5% of the household’s income.

However, that premium subsidy eligibility change did not change anything about the repayment caps for excess APTC. Under the ARP, an enrollee with household income above 400% of FPL can be eligible for premium tax credits. But there is no limit on how much excess APTC they must repay if it turns out that their APTC was more than their actual PTC.

Is there a cap on how much I have to pay back?

Yes. If your 2025 household income was less than 400% of the 2024 federal poverty level, here’s the maximum amount of excess APTC you’ll have to repay when you file your 2025 tax return:

Source: IRS.gov⁴

Starting with the 2026 plan year, however, there will not be a cap on how much excess APTC must be repaid. If a person owes excess APTC, they will have to repay all of it, regardless of how much it is.

How can I avoid having excess APTC?

The best way to avoid having excess APTC is to project your income as accurately as possible when you enroll, and then update your Marketplace account if your income changes during the year.

If you realize that your household income is going to be higher or lower than you initially projected, you can modify your income projection in your Marketplace account to reduce your subsidy amount for the rest of the year.

You also have the option to choose to receive less than the full amount of your APTC each month as a hedge against having to repay excess APTC at tax time. Your state’s Marketplace (HealthCare.gov or a state-run Marketplace, depending on where you live) might give you the option to adjust this on your application or in your account, or you might have to call the Marketplace and ask for the change to be made.

So for example, if your APTC is calculated as $300/month based on your projected household income, you can choose to have it set to $250/month instead. That would mean you’ll pay a higher after-subsidy premium each month, but it will also reduce the chance that you’ll have to repay excess APTC, assuming your income does not increase. And if it turns out that your actual premium tax credit does end up being $300/month, you’ll be able to claim the difference when you file your taxes. The premium tax credit is refundable, which means the IRS will refund it to you if it’s more than the amount you otherwise owe in taxes.

It's also worth noting that contributions to a pre-tax retirement account and/or a health savings account will reduce your MAGI, which is what the IRS uses to determine your premium tax credit eligibility.

If you had coverage under an HSA-qualified high-deductible health plan during the year, you may find that contributing to a health savings account may end up reducing the amount of excess premium tax credit that you'd otherwise have to repay, since HSA contributions will reduce your ACA-specific MAGI. You should consult your tax advisor to learn more about this.

What happens to my Obamacare premium subsidy if I overestimated my income?

If your actual income for last year ended up being lower than you projected, you may be able to claim some additional premium tax credit when you file your taxes.

In other words, if your APTC was smaller than it should have been (because your income ended up being less than you thought it would be), the IRS will give you the additional premium tax credit that’s owed to you. This will either be added to your tax refund or subtracted from the overall tax you owe (depending on whether you’re owed a refund or owe the IRS money).

For example, let’s say you’re a single 40-year-old in Chicago and you projected an income of $40,000 for 2025, which resulted in an APTC amount of $245/month throughout 2025. Now let’s say your income ended up being $35,000 instead. With that income, your actual premium tax credit would be $303/month.⁵

You would be able to claim the difference ($58 per month / $696 for the year) on Form 8962 when you file your 2025 taxes. If you owe federal income taxes for 2025, that $696 will be subtracted from the amount you owe. If you didn’t owe anything or were already owed a refund by the IRS, the $696 will be refunded to you.

But there are some of caveats to keep in mind here:

• Your premium tax credit can’t be more than the price of your plan. So if you enrolled in a plan that’s less expensive than your premium tax credit ends up being, you’ll only be able to recoup up to the cost of your plan.
• If your income ended up being in the range that’s Medicaid-eligible (or under the FPL in a state that hasn’t expanded Medicaid), you’re technically not eligible for premium tax credits at all. But the IRS will not require you to repay any APTC unless it determines that the information you provided when you enrolled was incorrect and given “with intentional or reckless disregard for the facts”⁶ (meaning you didn't intentionally deceive the Marketplace when you enrolled by, for example, purposefully providing incorrect data such as income and family size). This is despite the fact that you wouldn't have been eligible for any APTC when you enrolled if the Marketplace had known the amount that your income would actually end up being (i.e. Medicaid-eligible or below the federal poverty level, depending on the state). However, you won’t be able to recoup any additional premium tax credit beyond what was already paid in the form of APTC.
• Starting August 25, 2025, a new federal rule — which has been stayed by a judge pending the outcome of a lawsuit — called for the Marketplace to data sources (such as Experian, Equifax, and the IRS)⁷ indicate that the applicant’s income is below the FPL. Through the end of 2026, the Marketplace Integrity rule called for people in this situation to no longer be able to qualify for APTC based on just their attested income. But this rule change was stayed by a judge in August 2025, so it did not take effect on August 25.⁸ By requiring proof of income in these situations, the government had hoped to cut down on the number of people who receive APTC when their income is too low to qualify.⁹
  

What if I switched from a Marketplace plan to employer-sponsored health insurance mid-year?

If you enrolled in an employer-sponsored health plan later in the year – after you had already received APTC during the months you had individual-market coverage – you may end up having to repay some or all of those subsidies when you file your tax return.

It all depends on your total household income for the year, including income from your new job. In the eyes of the IRS, annual household income is annual household income – it can be evenly distributed throughout the year or come in the form of a windfall on December 31.

But premium tax credit reconciliation is done on a month-by-month basis, so you’ll still be able to claim a premium tax credit for the months you had Marketplace coverage as long as your total income for the year still makes you eligible for a premium subsidy.

If your new job results in total annual income that’s higher than you projected, you may have to repay some or all of your APTC when you file your taxes. This is true regardless of whether your income was lower during the months you had Marketplace coverage.

An example can help to make this clear. Let’s say subsidy was $284/month.¹⁰

Now let’s say you get a new job mid-year, with an offer of health insurance. So you drop your Marketplace plan and switch to the new employer’s plan. But the income you earn at your new job is also going to be factored in when you’re reconciling the subsidy amount you got during the first half of the year.

Let’s say your total income for 2025 ends up being $60,000 after including what you’ll earn at the new job. That changes your subsidy eligibility, even though the income jump happened after your Marketplace plan had ended. A 40-year-old in Houston who earns $60,000 in 2025 is only eligible for a $15/month subsidy.

The fact that the income increase happened after the Marketplace plan ended is irrelevant. This makes more sense when you keep in mind that APTC is a tax credit based on annual income, but unlike other tax credits that can only be paid after they are claimed on your tax return, APTC can be paid in advance. But the amount of APTC paid on your behalf has to be reconciled with the IRS.

So if $248/month was paid on your behalf for six months, that’s $1,488 in APTC. And if the actual tax credit amount should only have been $15/month (based on actual annual income), which means $1,398 of that was excess APTC.

$60,000 for a household of one is just slightly under 400% of the That means there is a cap on excess APTC repayment (for 2025, but not for 2026 and future years). But for a single filer in that income range, the repayment cap is $1,625.¹¹ Since the excess APTC in this case is below that cap, you’ll have to repay the full $1,398.

Once you become eligible for an affordable health insurance plan through your employer that provides minimum value, you’re no longer eligible for premium subsidies as of the month you become eligible for the employer’s plan. You may still be eligible for subsidies for the earlier months of the year, but as our example above illustrates, you may have to repay some or all of the subsidies that were paid for those months, depending on your actual annual income.

Finally, if you’re offered health insurance through an employer that you feel is too expensive based on the portion you have to pay, you can’t just opt out, buy your own health plan, and attempt to receive a premium subsidy. The fact that an affordable plan (by IRS definitions) is available to you will make you ineligible for any premium subsidies.¹²

How many people have to repay premium subsidies?

Millions of people have to repay excess APTC each year, but there are also millions of people who are owed additional premium tax credits when they file their taxes.

IRS data for the 2023 tax year shows the following:

• About 5.4 million tax returns included excess APTC, amounting to $7.2 billion that had to be repaid to the IRS. This amounts to an average of about $1,332 per return for filers who had to repay excess APTC.¹³ Excess APTC that has to be repaid is either subtracted from the filer’s refund or added to the amount they owe, as applicable.
• About 2.3 million tax returns were filed by people whose actual premium tax credit ended up being more than the APTC that had been paid on their behalf during the year. The IRS paid these filers the additional amount they were owed – a total of more than $2.5 billion. This amounted to an average of about $1,096 per return, for filers who were owed additional premium tax credits.¹⁴ This money is either added to the filer’s refund or subtracted from the tax they owe.
  

What happens if I don’t reconcile my premium tax credit?

Under the Affordable Care Act (ACA), a person who didn’t reconcile a prior year’s APTC (using Form 8962 with their tax return) was ineligible to receive APTC the next year.¹⁵ This approach was relaxed during the pandemic, and for 2024 and 2025, APTC was terminated only if the applicant had failed to reconcile their premium tax credit for two consecutive years.¹⁶

But for the 2026 plan year, APTC will not be available if the enrollee has failed to reconcile their tax credit for just one year.¹⁷

As of the 2022 tax filing season, the IRS no longer accepted e-filed returns that were missing Form 8962 if premium tax credits had been provided for the household. This helps to ensure that people do not inadvertently file a return without reconciling their premium tax credit, and the IRS noted that it has significantly reduced the number of e-filed returns that have to be sent to the agency’s Error Resolution System.