Marketplace subsidies are paid in advance, based on the income you expect to earn. At tax time, the IRS compares that estimate with what you actually earned. For years, a safety net limited how much you could owe if your estimate was too low. That safety net is gone.
What changed
The One Big Beautiful Bill Act, signed in July 2025, eliminated the caps on repaying excess advance premium tax credits for tax years beginning after December 31, 2025. In plain terms: for 2026 coverage and later, if you received more subsidy than you qualified for, you repay the full difference when you file.
Before the change, repayment was capped for households under 400% of the federal poverty level — at amounts ranging from a few hundred dollars to a few thousand depending on income and filing status. Those limits no longer apply.
How reconciliation works
- During the year, the marketplace pays your advance credit directly to your insurer.
- In January, you receive Form 1095-A showing your premiums and the advance credit paid.
- You complete Form 8962 with your tax return to calculate the credit you actually qualified for.
- If you qualified for more, you get the difference as a refund. If you qualified for less, you owe it back.
Who is most at risk
- Self-employed and gig workers whose income swings year to year.
- People who changed jobs mid-year, especially to higher pay.
- Households near the 400% FPL line, where a small income increase can eliminate the credit entirely.
- Anyone who got a raise, bonus, or large capital gain and did not update the marketplace.
A simple example
Suppose you estimated your income conservatively, received advance credits all year, and then earned substantially more than projected — enough that your actual credit is much smaller. Under the old rules, your repayment might have been capped. Under the new rules, you repay the entire excess. For a family, that can mean thousands of dollars due in April.
Five ways to protect yourself
- Estimate income carefully — use last year as a baseline and adjust for known changes. Our guide to estimating marketplace income covers what counts.
- Report changes within 30 days — update your application when income or household size changes so your advance credit adjusts.
- Take less advance credit if your income is unpredictable. You can claim the rest as a refund when you file.
- Set money aside if you suspect you are over-receiving.
- Review mid-year — a quick check in summer can prevent a surprise in spring.
Does this affect cost-sharing reductions?
No. Only advance premium tax credits are reconciled. Cost-sharing reductions are not paid back at tax time.
Tax rules are complex and individual. For questions about your return, talk with a tax professional. For choosing a plan and setting your advance credit sensibly, a licensed agent can help at no cost.
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