What Is the Premium Tax Credit for Health Insurance?
When you buy insurance through the health marketplace, you'll automatically get discounts, called premium tax credits, if you earn an income that qualifies.
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Most people who buy health insurance through HealthCare.gov or their state health exchange get "premium tax credits," also called subsidies. You can choose to pay less each month for health insurance with what's called an advanced premium tax credit (APTC), or you can get the full amount you're eligible for at the end of the year when you do your taxes.
To qualify for subsidies on health insurance, you need to have marketplace coverage and make about $63,000 or less per year (roughly $129,000 per year for a family of four).
Smaller premium tax credits will be available in 2026 than in years past because of expiring pandemic-era "enhanced subsidies". However, it's important to note that premium tax credits aren't going away. But you will probably end up paying much more for coverage if you're eligible for medical insurance subsidies.
Starting in 2026, the government will no longer cap how much you pay for health insurance if you earn above about $63,000 per year as an individual (roughly $129,000 per year for a family of four). Previously, you wouldn't pay more than 8.5% of your income on your monthly rate, no matter how much you made.
Keep in mind, some states are offering extra help through state-level subsidies. For example, in New Jersey, you can get premium tax credits if you make up to $93,900 per year as an individual ($192,900 per year for a family of four).
Congress may still choose to reverse some or all of these changes.
What is a health insurance tax credit?
A premium tax credit (also called a premium subsidy) lowers your monthly health insurance rate.
If you're eligible for a premium subsidy, you'll be given the choice to either apply your subsidy directly to your monthly rate or get it as a lump sum on your tax return when you buy health insurance through HealthCare.gov or a state health exchange. Health insurance tax credits help make coverage more affordable.
For example, an average full-cost Silver health plan costs $752 per month for a 40-year-old individual. But that drops to an estimated average of $175 per month after subsidies. In other words, the average person who qualifies for health insurance premium tax credits saves about $577 per month.
A health insurance premium is the amount you pay for coverage each month.
The credit is part of the Affordable Care Act (ACA), also called Obamacare. Premium tax credits help make marketplace health insurance more affordable.
Most people with Affordable Care Act (ACA), also called Obamacare, coverage can get premium tax credits. In 2025, more than 90% of people with marketplace plans got subsidies. The size of your premium tax credit will depend on your household income. Typically, the less you earn, the larger your subsidy.
You can get a premium tax credit only if you buy coverage from HealthCare.gov or your state's health exchange. The following plan types are eligible for subsidies:
- Bronze plans
- Silver plans
You can't get premium tax credits with catastrophic coverage, short-term plans or other medical insurance you buy directly through a company rather than HealthCare.gov or a state health exchange.
Who qualifies for the premium tax credit?
You'll typically qualify for premium tax credits if you make less than about $63,000 for a single person (roughly $129,000 for a family of four).
When you buy coverage through a health insurance marketplace (also called an exchange), the system will determine if you can get tax credits based on how much money you make and the number of people in your household.
You can get an idea of the size of your premium tax credit by using a health care subsidy calculator. If you qualify, you'll get a quote for the second-cheapest Silver plan available.
You may get free government health insurance, called Medicaid, if you make less than about $22,000 per year ($44,000 for a family of four). In states where you can qualify for Medicaid based only on your income, you may get automatically redirected to sign up for Medicaid after inputting your income on HealthCare.gov or your state health marketplace.
What is the income limit for marketplace insurance in 2026?
The 2026 Affordable Care Act (ACA) income limits for health insurance subsidies cap out at $62,600 for a single person and $128,600 for a family of four. Between 2021 and 2025, you wouldn't pay more than 8.5% of your income for health insurance. This spending limit will disappear in 2026 along with extra Covid-19 premium subsidies, unless Congress chooses to renew them.
Obamacare income limits by household size
Family size | Income range |
|---|---|
| 1 member | $15,650 - $62,600 |
| 2 members | $21,150 - $84,600 |
| 3 members | $26,650 - $106,600 |
| 4 members | $32,150 - $128,600 |
Add $5,500 for each additional person if you have more than eight people in your family. Different limits may apply to those living in Alaska and Hawaii.
If you make too much money to qualify for subsidies, you can still save on your taxes by buying a full-price Bronze or Catastrophic plan and opening a health savings account (HSA). An HSA works like a savings or investment account, but with a few key differences.
- HSAs are triple tax-advantaged. That means you don't pay taxes on your contributions, investment growth or qualified withdrawals.
- You can withdraw funds for nonqualified medical expenses after age 65 without penalty. This feature means you can use your HSA as an additional retirement account. Keep in mind, you still have to pay regular income tax on any withdrawals not made for qualified medical costs.
Health savings accounts roll over from year to year. Unlike flexible savings accounts (FSAs), the funds in your HSA don't expire.
You can open an HSA only with a high-deductible health plan, which is why you can't use an HSA with a Gold or Platinum plan.
How does the health insurance tax credit work?
You can get the health care tax credits in two ways.
- Advance premium tax credit (APTC): You pay a lower monthly rate for health insurance depending on how much money you think you'll make in a single year.
- Federal tax refund: You get your health insurance subsidy in a lump sum at the end of the year when you file your taxes.
There's no difference in the size of your discount between the two methods. The only difference is when you get the subsidy.
You should usually take the advance premium tax credit because it lowers your bills sooner.
Still, it might make more sense to get the tax refund at the end of the year if your income isn't consistent every month. That's because you could end up owing money when you file your taxes if you earned more than your estimated income.
Your accountant or tax preparation software will likely help you complete the appropriate forms to claim your tax credit. That includes Form 8962 (Premium Tax Credit). To complete Form 8962, you'll use the information from Form 1095-A (Health Insurance Marketplace Statement), which is a statement sent to you about your subsidies and health insurance costs.
What happens if my family size or income changes during the year?
Report any changes to your family size or income to the health marketplace to avoid an unexpected bill when you file your taxes.
It's important to remember that APTCs are based on how much money you think you'll earn in the coming year. That means if you put $40,000 as your estimated income, and you actually earn $48,000, you may have to pay back some of the subsidies you got.
The opposite is also true. If your income is smaller than anticipated, you may get extra money back on your tax return.
Fortunately, you can avoid owing money on your taxes by adjusting your estimated income during the year. If you choose APTCs and your income changes, log on to HealthCare.gov or your state health exchange and input your new information. The government will adjust the size of your subsidy based on these details.
Life-changing events can impact your tax credit eligibility or change your subsidy amount. For example, getting a divorce might lower your subsidy, since your household size goes down, but the birth of a child will increase the amount you save on health insurance.
In general, the larger your household size, the more tax credits you qualify for.
Events that change your premium tax credit
- Birth
- Change in your address
- Change in health insurance coverage
- Adoption
- Marriage or divorce
- Change in your household income
Frequently asked questions
What is a premium tax credit for health insurance?
A premium tax credit for health insurance lowers the amount you pay each month for health insurance costs. You don't have to take any special steps to apply for a premium tax credit. When you shop for coverage on HealthCare.gov or your state health exchange, your subsidy will be automatically calculated and shown to you before you buy your plan.
Who qualifies for the premium tax credit?
To qualify for ACA premium tax credits, you need to buy your plan through HealthCare.gov or a state marketplace, and you can't earn more than about $63,000 per year (roughly $129,000 for a family of four). You may be eligible for extra subsidies, called cost-sharing reductions (CSRs) if you choose a Silver health plan, and you earn less than about $39,000 per year (roughly $80,000 per year for a family of four).
How do I avoid paying back the premium tax credit?
You may have to pay back part or all of your advanced premium tax credit if your income or household size changes midyear and you don't report these changes to the health insurance marketplace. Fortunately, you can update your personal information on HealthCare.gov or your state health exchange at any time during the year. The government will automatically adjust your subsidies, so you won't have to pay back the premium tax credit when you file your taxes.
Sources and methodology
Federal poverty level (FPL) figures and limits are from HealthCare.gov. Information about federal premium tax credit eligibility guidelines is from IRS.gov.
Senior Writer
Talon Abernathy is a ValuePenguin Senior Writer who specializes in health insurance, Medicare and Medicaid. He's also contributed to other insurance verticals including home, renters, auto, motorcycle and flood insurance.
Talon came to ValuePenguin in 2023. Since his arrival, he's helped to expand the site's health insurance-related content offerings. He enjoys helping readers understand the ins and outs of America's all too complicated health insurance landscape.
Before coming to ValuePenguin, Talon worked as a freelance writer. His prior work has touched on a broad range of personal finance-related topics including credit-building strategies, small business incorporation tactics and creative ways to save for retirement.
Insurance tip
In many parts of the country, you can qualify for a free Silver health insurance plan if you meet certain income requirements. Government subsidies in the form of premium tax credits and cost-sharing reductions may mean you'll pay nothing for coverage.
Expertise
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- Medicare and Medicaid
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Referenced by
- The Miami Herald
- Money.com
- MSN
- Nasdaq
- The Sacramento Bee
- Yahoo! Finance
Education
- BA, University of Washington
- Certificate in Copyediting, UC San Diego
Credentials
- Licensed Life & Disability Insurance Agent
- Licensed Property & Casualty Insurance Agent
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