Most people who buy health insurance on the marketplace never see the full price of their plan. They see the number after a federal subsidy has already been subtracted, and that subsidy is the advance premium tax credit. It is the single largest discount available to anyone buying coverage on their own.
The mechanics matter more than they used to. The temporary pandemic-era enhancements to this credit expired on December 31, 2025, and HealthCare.gov’s own premium page now says so plainly. The pre-2021 rules are back in force for 2026 and 2027, including the hard income ceiling at 400% of the federal poverty line. Every figure below was pulled on September 6, 2026 from the statute, the IRS revenue procedures and the agency data.
What the Advance Premium Tax Credit Is
The premium tax credit lives in Internal Revenue Code section 36B. It is a refundable credit, meaning it can exceed your tax liability and still be paid to you.
You can receive it two ways. You can claim the whole thing when you file, which produces a larger refund the following spring. Or you can take it in advance, in which case the marketplace estimates your credit from the income you report on your application and sends the money monthly straight to your insurance company. Your bill drops by that amount. That second route is the advance premium tax credit, abbreviated APTC.
Almost everyone takes the advance. During the 2026 open enrollment period the average marketplace premium was $741 a month, the average APTC among people receiving one was $650 a month, and the average premium those enrollees actually paid was $96, according to KFF’s tabulation of CMS and state marketplace enrollment data.
Either way, the credit is reconciled on your tax return. The marketplace sends you Form 1095-A in the winter, and you use it to complete Form 8962, which compares what was paid in advance against what your final income actually entitled you to.
How the Dollar Amount Is Set
Section 36B builds the credit out of two numbers.
The first is the benchmark premium: the second-lowest-cost silver plan (SLCSP) available to your coverage family in your rating area. Not the plan you buy, and not the cheapest plan. If only one silver plan exists in your area, that plan is the benchmark. If the two cheapest silver plans are priced identically, that price is the benchmark. Tobacco surcharges are excluded from the benchmark calculation even if you smoke.
The second is your expected contribution: a percentage of household income that Congress set on a sliding scale and the IRS indexes each year. That percentage rises as income rises.
The credit is the benchmark minus your expected contribution. It is then capped at the premium of the plan you actually enrolled in, so a very cheap plan cannot generate a refund.
| Household income (% of federal poverty line) | 2026 rate | 2027 rate |
|---|---|---|
| Less than 133% | 2.10% | 2.15% |
| 133% up to 150% | 3.14% rising to 4.19% | 3.23% rising to 4.30% |
| 150% up to 200% | 4.19% rising to 6.60% | 4.30% rising to 6.78% |
| 200% up to 250% | 6.60% rising to 8.44% | 6.78% rising to 8.66% |
| 250% up to 300% | 8.44% rising to 9.96% | 8.66% rising to 10.22% |
| 300% through 400% | 9.96% | 10.22% |
Source: IRS Revenue Procedure 2025-25 for 2026 and Revenue Procedure 2026-26 for 2027. Within each band the percentage climbs in a straight line, so a household at 175% of poverty pays roughly the midpoint of the 150% to 200% range.
The credit is calculated off silver, but you are not required to buy silver. You can apply the full amount to a bronze, silver, gold or platinum plan. Catastrophic plans are the one exception and do not qualify. Buying below silver is where people lose money, because a cost-sharing reduction attaches only to silver plans and is worth thousands to households under 250% of poverty.
A Worked Example at 2026 Prices
Take a single 40-year-old with household income of $31,300 for 2026 coverage. The marketplace measures income against the 2025 poverty guidelines, where $15,650 is 100% of poverty for one person, so this is exactly 200% of the federal poverty line.
- Applicable percentage: 6.60% for 2026 at exactly 200% of poverty.
- Expected annual contribution: $31,300 times 6.60% equals $2,065.80, or $172.15 a month.
- Benchmark premium: $625 a month, the 2026 national average second-lowest-cost silver premium for a 40-year-old, per KFF.
- Advance premium tax credit: $625 minus $172.15, or $452.85 a month, about $5,434 for the year.
That $452.85 goes to the insurer every month. If this shopper buys the benchmark silver plan, the bill is $172.15. If they buy a bronze plan priced at $430, the credit covers all of it and the bill is $0, but they forfeit the cost-sharing reduction their income qualifies them for.
Now push the same person to exactly 400% of poverty, or $62,600. The applicable percentage jumps to 9.96%, the expected contribution becomes $6,234.96 a year or $519.58 a month, and the credit shrinks to $105.42 a month. Earn one dollar more and the credit is $0. That single dollar costs about $1,265 a year at the national average benchmark, and far more for older enrollees whose benchmark premiums are two to three times higher. That is the subsidy cliff, and the exact dollar thresholds are in our ACA subsidy income limits guide.
Who Qualifies
The IRS lists the requirements in its premium tax credit fact sheet. You must:
- Have household income at least 100% and no more than 400% of the federal poverty line for your family size.
- Not be eligible for other minimum essential coverage, including Medicaid, Medicare, CHIP, TRICARE or affordable employer coverage that provides minimum value.
- Not file as married filing separately, with a narrow exception for certain victims of domestic abuse and spousal abandonment.
- Not be claimed as a dependent on someone else’s return.
- Be enrolled in a marketplace plan that is not catastrophic coverage, with your share of the premium paid.
Note the asymmetry on employer coverage: you are disqualified if you are eligible for affordable employer coverage, whether or not you take it. But if you are eligible for COBRA or retiree coverage from a former employer and do not enroll, you can still get the credit.
The Employer Affordability Test
Employer coverage only blocks the credit if it is “affordable.” The IRS indexes that threshold every year alongside the subsidy percentages. For plan years beginning in 2026 the required contribution percentage is 9.96%, and Revenue Procedure 2026-26 sets it at 10.22% for 2027.
The test looks at the cheapest self-only plan your employer offers that provides minimum value. If your share of that premium is under the threshold for the year, the coverage is affordable and you cannot claim a marketplace credit.
The old family glitch made this brutal for spouses and children, because the family’s affordability was measured against the self-only premium even though the family had to buy the far more expensive family plan. That was fixed. Under current IRS guidance, family members are tested against the cost of the lowest-priced family coverage the employer offers, not the employee-only price. The employee is still tested on self-only, so it is entirely possible for the worker to be locked out of the credit while the spouse and kids qualify.
Take All of It, Some of It, or None
Here is the decision the marketplace application actually asks you to make, and it changed for the worse in 2026.
You can apply all of your estimated credit each month, apply part of it, or apply none and settle up at filing. HealthCare.gov walks you through changing this under “Report a Life Change.”
Taking the full advance is the right call for most people, because the alternative is fronting hundreds of dollars a month and waiting a year. But the risk is real: if your final income comes in higher than you estimated, you owe back the difference.
Through the 2025 tax year, repayment was capped for filers under 400% of poverty. That protection is gone. The IRS states that there is no repayment cap for tax years after 2025 and that you must repay the full amount by which advance payments exceeded your credit. Public Law 119-21 removed the caps for taxable years beginning after December 31, 2025.
Take less than the full credit if:
- Your income is variable and could plausibly land above 400% of poverty. Freelancers, commission earners and anyone whose situation resembles our self-employed health insurance guide should think hard here.
- You expect a bonus, a capital gain, a Roth conversion or a business windfall you cannot size yet.
- You are hovering just under a poverty-line threshold, where a modest income surprise erases the entire credit rather than trimming it.
And report changes as they happen. Income going up or a household member leaving means you qualify for less, and the sooner the marketplace knows, the smaller the bill in April.
Bottom Line
The advance premium tax credit is the marketplace’s price, not a rebate you chase later. It equals the second-lowest-cost silver premium in your area minus a legislated share of your income, it can be spent on any metal level except catastrophic, and it is capped at what your plan actually costs. Estimate your income honestly, check the number against the income limits before open enrollment opens, and remember that as of the 2026 tax year, every dollar of overpayment comes back out of your refund.