People who receive a health insurance premium credit for ACA plans need to know about a new rule to avoid a surprise tax bill.

For millions of Americans, including many small business owners, changes to the Advance Premium Tax Credit could result in an unexpected 2026 tax bill. Here’s what you need to know about the removal of the repayment cap.

New federal rule goes into effect for 2026

People who receive a federal tax credit for health insurance bought through the Health Insurance Marketplace (also known as the Exchange) estimate their income for the coming year. If their income is higher than expected, they’re required to pay back some or all of the credit. Through 2025, the payback amount was capped. Starting in 2026, a new federal rule removes the cap.

Who may be affected by the rule change?

Anyone who receives an APTC subsidy and earns more than projected on their application for 2026 health insurance coverage will be required to repay excess APTC paid on their behalf.

What’s the income cut-off for receiving APTC?

“In general, individuals and families may be eligible for the Premium Tax Credit if their household income for the year is at least 100% but no more than 400% of the federal poverty line for their family size,” the IRS says. (People below 100% of the poverty level may qualify for Medicaid.)

Here are the federal poverty levels for 2026 based on family size:

Family size	2026 income
Individual	$15,960
Family of 2	$21,640
Family of 3	$27,320
Family of 4	$33,000
Family of 5	$38,680
Family of 6	$44,360
Family of 7	$50,040
Family of 8	$55,720
Family of 9+	Add $5,680 for each extra person

Anyone who makes more than four times the federal poverty level for their household size is not eligible for an APTC. For example, an individual who earns more than $63,840 ($15,960 x 4) would not receive any health insurance subsidy.

The KFF Health Insurance Marketplace Calculator can help you estimate your income as a percentage of the poverty level and the credit you may be eligible for.

If APTC repayment is required, when is it paid?

Reconciliation between APTC received and what taxpayers are eligible for happens when they file their 2026 income taxes. Any excess credit received for 2026 will need to be repaid by April 15, 2027.

How to avoid a repayment surprise

To avoid a repayment surprise next April, report any changes that affect the amount of your credit in your Marketplace account. If your income goes up, the number of people in your household goes down, or you move, the credit you’re eligible for may decrease or be eliminated. (Conversely, a decline in income, increase in household members or move to a place with a higher cost of living could result in a higher credit.)

Also, contributions to an HSA (health savings account) and pre-tax retirement accounts can reduce modified adjusted gross income at tax time, which may help some people retain the APTC. HSAs and qualified retirement account contributions can be made until the tax filing deadline next year for this year.

To understand how the APTC cap may affect you, talk with a qualified tax professional or CPA.

 

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