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What Is the Premium Tax Credit? How It Works, Calculator for 2026

The premium tax credit is a refundable credit that helps some taxpayers afford health insurance premiums. The advance PTC lowers the premiums themselves.

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There aren’t many tax credits that can help lower your expenses throughout the year, but the premium tax credit (PTC) is a notable exception.

The PTC helps taxpayers afford the premiums of health insurance plans from the health insurance marketplace. Taxpayers can choose between getting the credit at tax time or getting it “in advance” throughout the year in the form of lower premiums.

Here are the details on the PTC, its eligibility criteria, the pros and cons of choosing the advance premium tax credit (APTC), and the tax forms you’ll need to claim the credit.

on Priority Tax Relief's website

on Alleviate Tax's website

What is the premium tax credit (PTC)?

The premium tax credit is a refundable tax credit that helps cover the cost of health insurance premiums. It’s available to taxpayers who have purchased a health insurance plan from the health insurance marketplace — the network of online health insurance exchanges established by the Affordable Care Act.

Refundable tax credits can lower or eliminate your taxes owed — plus, if the credit amount exceeds your taxes owed, the government will refund you the overage of the credit.

If you buy a health plan from the marketplace and are eligible for the PTC, you’ll be prompted to choose between receiving it as a tax credit when you file your return or paying it to your insurer in exchange for lower monthly premiums throughout the year. You can also choose to receive part of it as a credit and the rest in the form of lower premiums.

» Looking to calculate your PTC? Jump to our calculator below

Who is eligible for the premium tax credit?

To qualify for the premium tax credit, your health insurance situation, tax situation, immigration status and income need to meet certain criteria.

Qualifying health insurance plans

The PTC helps taxpayers afford health insurance marketplace plans — so to qualify for it, you’ll need one of those. To get more specific, you or someone in your tax family must have enrolled in a health insurance plan through the marketplace for at least one month of the calendar year in question.

You might not qualify for the PTC if other health insurance options are available to you — for example, employer-sponsored insurance or another government program such as Medicare. You also might not qualify for the credit if you do not pay your share of the marketplace plan premium (if the credit does not cover it all)

» MORE: Popular tax deductions and tax breaks

Income ranges for different household sizes

You’ll need an income above the federal poverty line to be eligible for the PTC. If your income is lower, other programs, such as Medicaid, may better suit your situation.

Your income also needs to be below 400% of the federal poverty line to qualify for the PTC

The federal poverty line varies based on the size of your household. Below is a table of the minimum PTC-eligible incomes (in other words, the federal poverty line) for different household sizes. The maximum incomes to qualify for the PTC (400% of the federal poverty line) are also shown.

Number of persons in household

Minimum income for PTC

Maximum income for PTC

1

$15,650

$62,600.

2

$21,150

$84,600.

3

$26,650

$106,600.

4

$32,150

$128,600.

5

$37,650

$150,600.

6

$43,150

$172,600.

7

$48,650

$194,600.

8

$54,150

$216,600.

Note: Alaska and Hawaii have higher income guidelines. See the United States Department of Health and Human Services website for more details

If you qualify for the PTC, the amount you'll receive is based on the cost of the second-lowest-cost Silver plan in your state marketplace, which is also called the “benchmark plan.” The PTC is calculated based on the principle that no qualifying taxpayer should have to pay more than 9.96% of their modified adjusted gross income (MAGI) to afford the benchmark plan.

The subsidy brings the annual cost of the benchmark plan down to that 9.96% of MAGI level, which is called the “applicable percentage,” if 9.96% of your MAGI is too low to afford the benchmark plan without the subsidy. The applicable percentage is 9.96% for people who earn between 300% and 400% of the federal poverty line, and it’s even lower for people who earn less. Below is a table of applicable percentages for different income levels.

Household income as a percentage of the federal poverty line

Maximum benchmark plan cost as a percentage of MAGI

Less than 133%

2.1%.

133% to 150%

3.14%.

150% to 200%

4.19%.

200% to 250%

6.60%.

250% to 300%

8.44%.

300% to 400%

9.96%.

Source: Internal Revenue Service

Tax status and immigration status

You must be a U.S. citizen or lawful permanent resident to receive the PTC. If you’re married filing separately, you cannot receive the PTC unless you are a victim of domestic abuse or spousal abandonment. You also can’t receive it if another taxpayer claims you as a dependent.

How does the One Big Beautiful Bill Act affect PTC eligibility?

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), a sweeping budget reconciliation bill, into law. The OBBBA cuts taxes and government spending in various ways and makes some changes to PTC eligibility.

The new law restricts PTC eligibility to U.S. citizens and lawful permanent residents. New immigrants who have been in the U.S. for less than five years and have incomes below the federal poverty line, including asylum seekers, parolees and people with Temporary Protected Status, will no longer qualify. These immigrants must also spend five years in the U.S. before they are eligible for Medicaid.

The law also ends automatic re-enrollment in marketplace plans, meaning that PTC recipients will need to re-verify their eligibility each year through their state marketplace website.

Finally, OBBBA disallows the PTC for certain people who enroll in a marketplace plan during a special enrollment period or SEP (that is, outside the typical open enrollment window, which runs from November until mid-January in most states). Specifically, it eliminates a former year-round SEP for people whose income is between 100% and 150% of the federal poverty line, and eliminates PTC eligibility for people who enrolled through this SEP policy.

How do you claim the premium tax credit?

The process of claiming the premium tax credit will differ slightly, depending on whether you’re using the advance premium tax credit (APTC) to lower your monthly premiums, receiving the regular PTC as a tax credit or doing some mix of the two.

In each case, when you enroll in health insurance through the marketplace, you’ll be prompted to choose whether to use some, all or none of your PTC to lower your health insurance premiums

Using some or all of your PTC to help pay premiums

If you choose to receive any amount of advance payments, your marketplace will automatically notify your insurer and start paying them the amount of APTC specified so your premiums decrease.

The following year, you’ll need to file Form 8962 with your tax return to “reconcile” your adjusted gross income (AGI) for the year with your projected income when you signed up for health insurance. If your AGI was lower than your projected income, you may get an additional PTC from the IRS as a refund or credit to lower your taxes. If it was higher, you may owe the IRS some money back.

Getting your entire PTC at tax time

If you choose not to receive any APTC, then you’ll need to file Form 8962 and indicate that you’ve received $0 in advance PTC payments so the IRS can apply your full PTC on your tax return. If you owe less in taxes than the credit amount you’re entitled to, your tax bill may shrink, or you may get the excess refunded.

on Priority Tax Relief's website

on Alleviate Tax's website

What is Form 8962?

Form 8962, "Premium Tax Credit," is the tax worksheet you use to settle up your PTC situation with the IRS.

APTC users must check their Form 1095-A, Health Insurance Marketplace Statement, which they receive from their marketplace, add up the total amount of APTC received for the year on Form 8962, and compare this to the amount of PTC they were actually eligible for that year based on AGI to determine whether there was any overpayment or underpayment.

PTC users who are receiving their entire credit when filing their returns can simply indicate that they received no APTC during the year and then calculate the amount of PTC they will receive as a credit or refund, based on income. Tax software can simplify the process of filling out this form and claiming your PTC, and the IRS recommends that taxpayers file electronically.

Should you choose the advance premium tax credit?

The question of whether it’s better to receive the APTC or get the full PTC at tax time will depend on your circumstances. A financial plan can help you understand how the decision may affect your budget throughout the year, and your refund or bill at tax time.

Fundamentally, it’s a question of whether you’re willing to put up with a more complicated tax situation to save some money.

Advance premium tax credit pros

Immediately lower monthly health insurance premiums. The most obvious upside of choosing the APTC is that it lowers your monthly health insurance bill right away — you don’t have to wait until refund time to get it.

Keeping your money is mathematically better than getting a bigger refund. The IRS does not pay interest on the money it holds until tax time — and meanwhile, the value of that money is decreasing slightly due to inflation. If you save your whole PTC in hopes of getting a bigger refund, that money is worth slightly less than if you choose the APTC and receive it throughout the year in the form of lower premiums.

Advance premium tax credit cons

Possibility of owing money at tax time. If your income increases during the year, the amount of PTC you can receive might decrease. If you use the advance payments and this happens, you may find at tax time that you received more APTC than you were actually allowed based on your total income for the year. In that situation, you may have to pay back the excess amount of APTC you received. An analysis of IRS data by HealthInsurance.org showed that 2.6 million taxpayers had to repay some of their APTC in 2021, with the average repayer owing $1,464.

More complicated tax return. If you like your taxes to be simple, you may not like all the hassle that comes with choosing to receive some or all of your PTC in advance. Even if you don’t end up owing money, the Form 8962 reconciliation process involves some fairly tedious bookkeeping work for APTC users, who have to calculate their income, APTC received, and any overpayment or underpayment for each month of the year. If you’re unsure how to do this, you may want to consult a tax preparer.

» Ready to file? Check out NerdWallet's top picks for tax software

Helpful resources

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on Priority Tax Relief's website

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