Why do some enrollees take their ACA premium subsidy during the year while others claim it at tax time?

How do premium tax credits work?

The Affordable Care Act’s premium subsidy is a refundable tax credit – designed to make premium costs for Marketplace coverage more affordable. Unlike most tax credits, you can take the premium subsidy in advance (as an advance payment of premium tax credit, or APTC), paid directly to your insurer each month. However, you also have the option to pay full price for your Marketplace coverage and then claim the entire premium tax credit on your tax return. (This will be in the form of a refund or a reduction of the income tax balance you otherwise owe.)

Most people choose to take at least some of their tax credit upfront, paid to their insurer throughout the year. According to the IRS, the number of 2021 tax returns that included APTC was actually higher than the number of 2021 tax returns that ended up being eligible for the premium tax credit.² (People who take APTC but end up not being eligible for the premium tax credit have to repay some or all of the excess APTC to the IRS when they file their tax return. Note that starting with the 2026 tax year, there will no longer be a cap on how much excess APTC has to be repaid.)

Why do most people take the premium subsidy during the year?

The fact that virtually everyone eligible for premium tax credits receives at least some amount of APTC could be related to how expensive full-price health insurance can be. Paying full price each month and having to wait until the following tax season to recoup the tax credit would be unappealing for many subsidy-eligible enrollees.

Premium subsidies offset a large portion of the monthly premiums for the majority of the people who enroll in plans through the health insurance exchange in each state: Ninety-three percent of exchange enrollees were receiving premium subsidies as of early 2025 (paid in advance to their health insurers each month). Those subsidies amounted to 89% of the average total premium amount for all enrollees.³ (Note that if subsidy enhancements are allowed to expire at the end of 2025, fewer enrollees will qualify for subsidies in 2026. This issue was still up in the air as of mid-November 2026.)⁴

Why might some people not opt for advance payment (APTC)?

To receive your tax credit in advance as payments to your insurer (APTC), you have to go through an eligibility determination process at the time that you enroll in a health insurance plan through the Marketplace. This involves projecting your income for the coming year, the details of which will depend on your circumstances (for example, W-2 employee versus a self-employed worker, or a person with a steady income versus a person with a variable income).

Some people prefer to skip that process altogether, pay full price for their coverage, and claim the entirety of the premium tax credit as a lump sum when they file their tax return the following spring.

How can I claim my premium tax credit?

Regardless of whether you plan to take your premium subsidy throughout the year or claim the entire amount on your tax return, it’s only available if you enroll in a plan through the Marketplace / exchange in your state. You cannot get a premium subsidy if you enroll in a plan outside the exchange.

The HealthCare.gov interface (used in 30 states as of 2026) and the state-run exchanges have user-friendly plan comparison tools that you can use to estimate whether you qualify for a subsidy under then-current laws and regulations and if so, the amount of the subsidy. Depending on the size of the subsidy, you can decide whether you want to go through the subsidy eligibility determination when you enroll.

When do I choose how to receive my premium subsidy?

During your application process, you’ll be asked if you want to see whether you qualify for financial assistance. If you say yes, you’ll go through a series of questions to determine your eligibility for financial assistance (including the premium tax credit but also Medicaid, CHIP, and cost-sharing reductions).

The exchange will compare your income projection with the records the government already has, and may ask you to provide additional documentation to back up your income projection.

How do I reconcile my premium tax credit at tax time?

After the end of the year, everyone who was enrolled in a plan through the Marketplace – regardless of whether they end up qualifying for a premium tax credit – receives Form 1095-A from the exchange. The form is available from the exchange website as of January, and exchanges also mail the form to enrollees, or deliver it electronically if the enrollee selects that option.

The information on this form is used to reconcile or claim the tax credit when enrollees file their tax returns. People who did not receive APTC and are certain they don’t qualify for a subsidy can skip Form 8962 and don’t need to do anything with Form 1095-A.

Everyone who receives  premium tax credits – either in advance or claimed in full on their tax return – has to fill out the same form (Form 8962) on their tax return to reconcile or claim the tax credit.

If you receive your premium tax credit in advance – paid to your insurer each month on your behalf – and it ends up being too small (which is determined via Form 8962 after the year is over and your income is certain rather than estimated), you’ll claim the additional amount when you file your taxes. But if your advance premium tax credit was too big, you’ll have to pay back some or all of it when you file your taxes. As noted above, the 2026 plan year will be the first time when there’s no limit on how much excess premium tax credit has to be repaid. People who receive too much premium tax credit during the year will have to repay all of the excess when they file their tax return.