Updates to Questions and Answers about the Premium Tax Credit
What is the Premium Tax Credit? (updated Dec. 23, 2025)
The Premium Tax Credit is a refundable tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace, also known as the Exchange. The size of your Premium Tax Credit is based on a sliding scale. Those who have a lower income get a larger credit to help cover the cost of their insurance. When you enroll in Marketplace insurance, you can choose to have the Marketplace compute an estimated credit that is paid to your insurance company to lower what you pay for your monthly premiums (called advance payments of the Premium Tax Credit, APTC, or advance credit payments). Or, you can choose to get all of the benefit of the credit when you file your tax return for the year. If you choose to have advance payments of the Premium Tax Credit made on your behalf, you will reconcile the amount paid in advance with the actual credit you compute when you file your tax return for the year. Either way, you will complete Form 8962, Premium Tax Credit (PTC), and attach it to your tax return for the year.
The credit is “refundable” because, if the amount of the credit is more than the amount of your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund. However, if advance credit payments were made to your insurance company and your actual allowable credit on your return is less than your advance credit payments, the difference (called excess advance payment of the PTC), subject to repayment caps, will be subtracted from your refund or added to your balance due (except for tax year 2020 when excess advance payment of the PTC did not affect tax liability). For tax years before 2026 (other than 2020), if your allowable credit is less than your advance credit payments, a repayment cap may limit the amount of the excess advance payment of the PTC that is subtracted from your refund or added to your balance due. However, for tax years after 2025, if your allowable credit is less than your advance credit payments, there is no repayment cap and the total difference will be subtracted from your refund or added to your balance due.
What are the repayment caps? (updated Dec. 23, 2025)
For tax years before 2026 (except for 2020 when excess advance payment of the Premium Tax Credit did not affect tax liability), if your advance credit payments for a year were more than your actual allowable credit for the year, a repayment cap may limit the amount of the excess advance payment of the Premium Tax Credit that you must repay. Your applicable repayment cap is based on your household income and filing status for the year and applies only if the household income you reported on your tax return is less than 400 percent of the FPL. There is no repayment cap for tax years after 2025. For tax years after 2025, you must repay the full amount by which your advance credit payments exceed your Premium Tax Credit. This amount is added to your total tax liability, which will reduce your refund or increase your balance due. See Publication 974 for more information on the repayment caps.
What happens if I have a balance due from an excess advance payment of the Premium Tax Credit, but I cannot afford to make the payment when filing my tax return?
Many individuals who need to repay excess advance payments of the Premium Tax Credit will satisfy that balance through a reduction in their expected income tax refund. However, if you owe a balance in excess of your refund, you should be aware that the IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The ability to make a payment arrangement for these underpayments is identical to the provisions for other tax balances. See Publication 4849, Can’t Pay the Tax You
Owe? for further information on how to pay your past due federal income tax liability.
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AUTHOR: IRS
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