Advance premium tax credits lower monthly Marketplace premiums using estimated eligibility. At tax time, Form 8962 reconciles those advances with the credit you actually qualify for. For tax year 2026, you must repay the full excess if advances exceed your allowable credit; the former income-based repayment caps no longer apply. If your allowable credit is larger than the advances, you may claim the difference. Review income, household and coverage changes promptly rather than waiting until filing.

Most people find this out in April, which is the worst possible time to find it out.

How the advance and the reconciliation fit together

For tax year 2026 there is no repayment cap on excess advance premium tax credits. Report changes promptly so the Marketplace can adjust future advances; updating does not erase excess credits already paid.

When you enrol, you project your household income for the coming year. The Marketplace calculates a premium tax credit from that projection and pays it directly to your insurer each month, which is why your bill is lower than the plan's actual price. That is the advance.

After the year ends, your Marketplace provides Form 1095-A showing what was paid on your behalf. You use it to complete Form 8962 with your return, which compares the credit you received against the credit your actual income entitled you to. The gap is settled on that return — in either direction. If you would like the mechanics of the credit itself, they are in how ACA subsidies work.

The part that decides how much this hurts

For tax year 2026, repayment is the excess of your advance payments over your actual allowable premium tax credit. The former income-based repayment limitations do not apply, including below 400% of the federal poverty level.

  • Below 400% of the federal poverty level, tax-year 2026 excess advance credits must still be repaid in full. A lower income does not restore the former repayment cap; eligibility and the allowable credit must be calculated under the current rules.
  • At or above 400% of the federal poverty level, do not assume a premium tax credit applies. The temporary enhanced-credit rules for 2021–2025 ended; for 2026, income eligibility and other requirements must be checked. Any excess advances are repaid without the former income-based cap.

Two different rules changed: the temporary enhanced-credit eligibility rules ended after 2025, and the income-based repayment caps were removed beginning with tax year 2026. Even a household that remains eligible for some credit can owe the full excess advance amount. Your Form 1095-A, household information and tax-year rules determine the reconciliation.

We are deliberately not printing a dollar figure for the poverty level here, because it changes with household size and with the year, and a wrong number would be worse than none. The current figures are on our federal poverty level page.

The mistake that causes most of these bills

It is not fraud and it is rarely carelessness. It is this: reporting your own income instead of your household's.

The Marketplace calculates on household income for everyone on your tax return. If you are married and filing jointly, your spouse's income counts — even if they have coverage through their employer, even if they are not on the plan with you, even if you keep your finances entirely separate. The application asks for one number and people supply the one they think of as theirs.

It surfaces quickly, because the application is checked against IRS records. That check is what generates a verification request, and an unanswered verification request is what ends coverage — see why a Marketplace plan gets cancelled after about three months. The same wrong number causes both problems: one in month three, one in April.

Situations that quietly change the number

Income projections go wrong honestly. These are the ones we see most:

  • A spouse's income was left out — by far the most common.
  • Severance or a payout after a layoff, which is income in the year it is received.
  • A retirement account withdrawal, including a conversion, which lands in that year's income.
  • Self-employment that went better than expected. The projection was honest in January and wrong by October.
  • Unemployment compensation, which counts.
  • A return to work mid-year, where the new salary is annualised against months you were not earning it.

One more thing worth saying plainly: a repayment is not a penalty and it is not a sign you did anything wrong. It is the reconciliation working as designed. What makes it painful is only ever the surprise.

What to do if you think your estimate is off

You are not stuck with the number you gave in November, and this is the single most useful thing on this page.

You can update your income with the Marketplace during the year. Log in, report the change, and the credit is recalculated from that point forward. Your premium goes up, which nobody enjoys, and you stop accruing a repayment you would otherwise meet in one lump in April. Doing this in July costs far less than discovering it the following spring.

If the change pushes you above the subsidy threshold entirely, that is worth knowing early too, because it changes what makes sense to buy. At that point you are comparing the full unsubsidised premium against everything else available, which is a different exercise — what to do when Marketplace premiums are out of reach covers the options and is honest about what each one does not do.

Questions worth asking whoever enrolled you

  • What income figure is on my application, exactly?
  • Is that my income or my household's?
  • What percentage of the federal poverty level does that put me at?
  • What happens to my credit if I end the year above that line?
  • Did the Marketplace request any documents from me, and when are they due?

An agent who cannot answer the first two from your file has not looked at your file. The last one is a separate problem with the same root, and it is covered in what documents you need to enrol.

How The Jordan Insurance Agency helps

We are an independent agency in Charlotte, and our licensed agents have worked with North Carolina families since 2006. We would rather quote you a higher premium in September than hand you a surprise in April, so we ask about household income directly, we ask about severance and withdrawals and a spouse's plan, and we say plainly when a subsidy is not going to hold up.

We are not tax preparers and this is not tax advice — for your specific return, talk to your tax professional. What we can do is make sure the number on your application is the right one before it becomes their problem.

Do you mind if we take a look together?

Compare actual policy documents and written quotes. Premiums, covered events, waiting periods, exclusions and benefit limits vary by plan and applicant. A supplemental cash benefit may be less than the medical bill; do not assume unlimited benefits or full reimbursement without the specific policy terms.

See the IRS explanation of repayment-cap removal beginning in tax year 2026 and IRS premium tax credit questions and answers. Tax-year 2025 reconciliation and tax-year 2026 reconciliation follow different repayment rules.