Quick answer: the premium tax credit is a federal tax credit that lowers the monthly cost of a health plan bought through HealthCare.gov or a state Marketplace. For 2027 coverage, you generally need household income between 100% and 400% of the federal poverty level, which is $15,960 to $63,840 for a single person and $33,000 to $132,000 for a family of four. The credit equals the cost of your area’s benchmark Silver plan minus the share of income you are expected to pay, from 2.15% to 10.22% of income. You can take it in advance each month or claim it when you file, but if you take too much in advance you now repay the full difference.
Most people who buy their own health insurance never see the full sticker price of their plan. The difference is the premium tax credit, often called a Marketplace subsidy. It is the single biggest factor in what individual coverage costs, and it is also the part people misunderstand most often.
The rules shifted twice in a short period. Temporary enhancements that made the credit larger and available to more people expired at the end of 2025, and a 2025 federal budget law changed repayment and eligibility rules. This article explains how the credit works under the rules in place for 2027 coverage, how it is calculated, how to avoid a tax-time surprise and how it fits with the rest of our guide to health insurance plans, costs and enrollment.
Rules and figures come from HealthCare.gov, the IRS, CMS and KFF, checked October 2026. HealthCare.gov posts 2027 savings estimates on November 1, 2026; the numbers below come from IRS guidance already published for 2027. Tax situations vary, so treat this as general information, not tax, legal or insurance advice.
What the Premium Tax Credit Is
The premium tax credit is a refundable federal tax credit created by the Affordable Care Act. “Refundable” means you can receive it even if you owe little or no income tax.
Two ways to receive it
- In advance. The Marketplace sends the credit to your insurer every month, which lowers the premium you pay. This is called the advance premium tax credit, or APTC.
- At tax time. You pay the full premium during the year and claim the whole credit on your federal return.
Most enrollees take it in advance, because waiting until tax season means paying the full premium for twelve months first. You can also take only part of it in advance and claim the rest later, which lowers the risk of owing money back.
What it does not cover
The credit applies to premiums only. Deductibles, copays and coinsurance are not reduced by it. A separate program, cost-sharing reductions, lowers those costs for some lower-income enrollees who pick a Silver plan; our explainer on ACA metal tiers covers how that works with Bronze, Silver, Gold and Platinum plans.
Who Qualifies for 2027 Coverage
Several conditions apply at the same time.
Basic requirements
- You buy a plan through HealthCare.gov or your state’s official Marketplace. Plans bought directly from an insurer outside the Marketplace do not qualify.
- Your household income falls within the eligible range, generally 100% to 400% of the federal poverty level.
- You are not eligible for other qualifying coverage, such as Medicaid, CHIP, Medicare or a job-based plan that is considered affordable and meets minimum value standards.
- You file a federal tax return for the year and, if married, generally file jointly.
- No one else can claim you as a tax dependent.
Immigration status rules for 2027
The 2025 budget law limited the credit to U.S. citizens, nationals and certain lawfully present noncitizens named in the law, starting with 2027 coverage. CMS’s 2027 payment rule requires Marketplaces to verify that status, and on October 14, 2026, Treasury and the IRS proposed regulations to carry out the change. Many lawfully present immigrants who qualified in past years may no longer be eligible. Anyone unsure should check their eligibility notice carefully or contact a Marketplace assister.
Medicaid comes first
In states that expanded Medicaid, adults with income up to 138% of the poverty level are generally directed to Medicaid instead of Marketplace savings. In states that did not expand, people below 100% of the poverty level often fall into a gap where they qualify for neither.
The Income Range in Dollars
Marketplace savings for a coverage year use the prior year’s poverty guidelines. According to HealthCare.gov’s federal poverty level glossary, savings for 2027 coverage are based on the 2026 figures below, published by HHS in January 2026 for the 48 contiguous states and Washington, D.C. Alaska and Hawaii have higher guidelines.
| Household size | 100% of poverty level | 250% | 400% |
|---|---|---|---|
| 1 | $15,960 | $39,900 | $63,840 |
| 2 | $21,640 | $54,100 | $86,560 |
| 3 | $27,320 | $68,300 | $109,280 |
| 4 | $33,000 | $82,500 | $132,000 |
| 5 | $38,680 | $96,700 | $154,720 |
The 400% cliff
Under the law in effect for 2027, households with income above 400% of the poverty level generally get no premium tax credit at all. One dollar over the line can mean losing the entire credit. The House passed a three-year extension of the enhanced credits in January 2026, but the Senate has not acted, so that cliff is current law.
What counts as income
The Marketplace uses modified adjusted gross income. HealthCare.gov suggests starting with the adjusted gross income on your Form 1040, line 11, and adjusting for expected changes. Untaxed foreign income, non-taxable Social Security benefits and tax-exempt interest are added back. Count yourself, your spouse if married, and everyone you will claim as a tax dependent, even people who do not need coverage. Savings are based on your estimate for the coverage year, not last year’s income.
How the Credit Is Calculated
The formula has three parts: a benchmark plan, an expected contribution and the plan you actually pick.
Step 1: The benchmark plan
The benchmark is the second-lowest-cost Silver plan available to your household in your area. Its price changes every year and differs by ZIP code, age and household size, which is why the same income can produce very different credits in different places.
Step 2: Your expected contribution
The IRS sets the share of income you are expected to pay toward the benchmark. For 2027, IRS Revenue Procedure 2026-26 sets this table:
| Household income as % of poverty level | Expected contribution (share of income) |
|---|---|
| Under 133% | 2.15% |
| 133% to under 150% | 3.23% to 4.3% |
| 150% to under 200% | 4.3% to 6.78% |
| 200% to under 250% | 6.78% to 8.66% |
| 250% to under 300% | 8.66% to 10.22% |
| 300% to 400% | 10.22% |
Within each band, the percentage rises gradually as income rises.
Step 3: The credit
Your credit equals the benchmark premium minus your expected contribution. If that number is zero or negative, there is no credit. The credit can never be larger than the premium of the plan you choose.
A Worked Example
The prices here are hypothetical and chosen only to show the math. Real 2027 premiums appear on HealthCare.gov from November 1, 2026.
The household
A single adult expects $31,920 of income in 2027, which is 200% of the poverty level. At 200%, the 2027 expected contribution is 6.78% of income: $31,920 times 6.78% is about $2,164 a year, or about $180 a month.
The credit
Suppose the benchmark Silver plan for this person costs $550 a month. The credit is $550 minus $180, or $370 a month.
Applying it to different plans
| Plan chosen (hypothetical price) | Monthly premium before credit | Credit | You pay |
|---|---|---|---|
| Bronze | $400 | $370 | $30 |
| Benchmark Silver | $550 | $370 | $180 |
| Gold | $650 | $370 | $280 |
The credit is a fixed dollar amount, so cheaper plans shrink to very low premiums and richer plans cost you the full difference above the benchmark. A lower premium usually means a higher deductible, so compare total yearly cost, not only the monthly bill. Someone at this income would also likely qualify for cost-sharing reductions on a Silver plan, which lower deductibles and copays.
Employer Coverage and the Affordability Test
An offer of job-based coverage can block the credit even if you never enroll in it.
The 2027 threshold
If your employer offers a plan that meets minimum value and your share of the cheapest self-only option costs no more than a set percentage of household income, the offer counts as affordable and you generally cannot get a premium tax credit. Revenue Procedure 2026-26 sets that percentage at 10.22% for plan years beginning in 2027.
Family members
Affordability for a spouse or children is measured separately, and HealthCare.gov provides a tool to check whether a job-based offer counts as affordable for each member of the household. If you are between jobs or starting a new one, our article on how health insurance works when you switch jobs explains the timing.
Reconciling the Credit at Tax Time
Every household that receives advance payments must reconcile them on its federal return.
The forms
Your Marketplace sends Form 1095-A early in the year. You use it to complete IRS Form 8962, which compares the advance payments made for you with the credit you qualify for based on your actual income and household.
Full repayment is now the rule
If your actual income turns out higher than your estimate, you received more credit than you were owed. Before 2026, repayment of that excess was capped for many lower- and middle-income filers. The 2025 budget law removed those caps starting with 2026 coverage, and KFF notes that most enrollees must now repay the full amount of any excess advance credit. If your income was lower than expected, you receive the difference as part of your refund.
Do not skip the filing
CMS’s 2027 rule says Marketplaces on the federal platform will apply a one-year “failure to file and reconcile” policy for 2027: if you received advance payments for a past year and did not file a return and reconcile them, you can lose advance payments going forward.
How to Avoid a Surprise Tax Bill
A few habits lower the risk of owing money in April.
- Estimate carefully. Include raises, bonuses, side income, unemployment benefits and taxable retirement withdrawals.
- Update the Marketplace quickly. Report income or household changes, such as marriage, divorce, a new baby or a new job offer, as soon as they happen so your advance payments are adjusted.
- Consider taking less in advance. You can choose to apply only part of your credit each month and claim the rest when you file.
- Watch the 400% line. If your income is near the cliff, a contribution to a traditional IRA or an HSA can lower modified adjusted gross income. A tax professional can tell you whether that applies to you.
- Keep your documents. Save your eligibility notices, Form 1095-A and records of income changes.
New Verification Rules for 2027
The Marketplace is checking more before it approves savings.
Income checks
CMS’s 2027 rule keeps a requirement for extra income verification when federal data shows income under 100% of the poverty level, and Marketplaces no longer accept a household’s income statement alone when the IRS has no data for that household. Be ready to upload pay stubs or other proof.
Special Enrollment Periods
A monthly enrollment option for people with income up to 150% of the poverty level ended after 2026. Exchanges on the federal platform must also verify eligibility for most new enrollments through Special Enrollment Periods before coverage starts. Our guide to open enrollment and Special Enrollment Periods explains which life events qualify.
Automatic renewal
KFF notes that new pre-enrollment verification requirements in the 2025 budget law could effectively end automatic re-enrollment starting in 2028. For 2027, returning to HealthCare.gov during open enrollment to update your information is still the safest way to keep the right credit.
Where Premiums Are Heading
Insurers proposed a median premium increase of 15% for 2027, according to KFF’s analysis of rate filings. Because the credit is tied to the benchmark plan’s price, people who qualify for the credit are partly shielded from those increases. KFF has pointed out that households above 400% of the poverty level, who get no credit, absorb the full increase. Some states add their own help on top of the federal credit; KFF reported that New Mexico, which replaced the expired federal enhancements with state subsidies, was the only state where Marketplace enrollment did not fall in 2026.
Plan type still matters
The credit lowers the price of any eligible plan, but it does not choose the network for you. Our comparison of HMO, PPO, EPO and POS plans explains how to match a plan type to your doctors.
Key Dates for 2027
On HealthCare.gov, open enrollment runs November 1, 2026 through January 15, 2027. Enroll by December 15, 2026 for coverage that starts January 1. State-run Marketplaces may set different dates. Free help from trained navigators is available through HealthCare.gov’s local help search.
Frequently Asked Questions
Who qualifies for the premium tax credit in 2027?
Generally, people who buy a plan through the Marketplace, have household income between 100% and 400% of the federal poverty level, are not eligible for Medicaid, Medicare or affordable job-based coverage, meet the immigration status rules and file a tax return.
What is the income limit for ACA subsidies in 2027?
Under current law, the limit is 400% of the poverty level. For 2027 coverage that is $63,840 for one person and $132,000 for a family of four in the 48 contiguous states.
Did the enhanced premium tax credits come back for 2027?
No. The enhanced credits expired at the end of 2025. The House passed an extension in January 2026, but the Senate has not voted on it.
Do I have to pay back the premium tax credit?
Only if you received more in advance than you qualify for. Starting with 2026 coverage, most people must repay the full excess when they file. If you received less than you qualify for, you get the difference back.
Can I use the premium tax credit on any plan?
You can use it on Bronze, Silver, Gold and Platinum plans bought through the Marketplace. It cannot be used on Catastrophic plans or plans bought outside the Marketplace.
How is the premium tax credit calculated?
It equals the price of the second-lowest-cost Silver plan in your area minus your expected contribution, which for 2027 ranges from 2.15% to 10.22% of household income.
Sources
- HealthCare.gov, Income levels and savings; Federal poverty level glossary; Cost-sharing reductions.
- HHS, 2026 Poverty Guidelines (Federal Register, January 15, 2026).
- IRS Revenue Procedure 2026-26 (2027 applicable percentage table and required contribution percentage), Internal Revenue Bulletin 2026-31.
- CMS, HHS Notice of Benefit and Payment Parameters for 2027 final rule fact sheet (May 15, 2026).
- KFF, FAQs on changes to Marketplace premium tax credits (updated January 14, 2026) and repayment of excess advance credits; “Midterm Election Update: The Affordable Care Act Marketplaces” (October 6, 2026); “How Much and Why ACA Marketplace Premiums Are Going Up in 2027.”
