Updated Premium Tax Credit FAQs Reflect OBBBA Changes and Expiring Provisions

(Parker Tax Publishing January 2026)

The IRS issued updated frequently asked questions (FAQs) related to the changes to the Code Sec. 36B premium tax credit (PTC) made under the One Big Beautiful Bill Act (OBBBA) (Pul. L. 119-21) and to related provisions that no longer apply. The OBBBA amended Code Sec. 36B(f) removed the limitations on repayment of excess advance payments of the PTC for tax years beginning after December 31, 2025. FS-2025-10.

Background

The premium tax credit (PTC) under Code Sec. 36B 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 (i.e., the Exchange).

Under Code Sec. 36B(c)((1), an individual is eligible for the PTC (i.e., is an "applicable taxpayer") if he or she meets all of the following requirements:

(1) the individual's household income meets certain requirements;

(2) the individual does not file married filing separately (subject to an exception for victims of domestic abuse and spousal abandonment);

(3) the individual cannot be claimed as a dependent by another person; and

(4) for a least one month of the year, (i) the individual or another family member was enrolled in coverage through a marketplace, (ii) the individual enrolled was not able to get affordable coverage through an eligible employer-sponsored plan, (iii) the individual enrolled was not eligible for coverage through a government program (e.g., Medicaid, Medicare, CHIP or TRICARE), and (iv) the share of premiums for the month not covered by advance credit payments was paid, or special circumstances applied that allowed the individual to stay covered despite all of his or her premiums not having been paid.

Generally, under Code Sec. 36B(c)(1)(A), individuals and families may be eligible for the PTC if their household income for the year is at least 100 percent but no more than 400 percent of the federal poverty line for their family size. For purposes of the PTC, an individual's household income generally is his or her modified adjusted gross income for the year plus that of every other member of the individual's family who is required to file a federal income tax return.

However, for tax years 2021 through 2025, Congress added Code Sec. 36B(c)(1)(E) to temporarily expand eligibility for the premium tax credit by eliminating the requirement that a taxpayer's household income may not be more than 400 percent of the federal poverty line. Under this rule, taxpayers with household income of more than 400 percent of the federal poverty line for their family size may be allowed to claim a PTC if otherwise eligible.

Under Code Sec. 36B(f), an eligible taxpayer who applies for Marketplace coverage may elect to have some or all of the PTC paid in advance directly to the insurance company to lower the taxpayer's monthly premiums. In this case, the Marketplace will compute an estimated credit based on family size and household income. A taxpayer who chooses to have advance credit payments made on his or her behalf is required to file Form 8962, Premium Tax Credit (PTC), with the taxpayer's income tax return to reconcile the amount of advance credit payments with the PTC the taxpayer may claim based on his or her actual household income and family size.

For tax years before 2026 (except for 2020, when excess advance payment of the PTC did not affect tax liability), if an individual's advance credit payments for a year were more than his or her actual allowable credit for the year, a repayment cap may limit the amount of the excess advance payment of the premium tax credit that the individual must repay. The applicable repayment cap is based on household income and filing status for the year and applies only if the household income you reported on the individual's tax return is less than 400 percent of the federal poverty line.

FS-2025-10

In FS-2025-10, the IRS updated frequently asked questions (FAQs) related to the changes to the PTC made under the One Big Beautiful Bill Act (OBBBA) (Pub. L. 119-21) and to related provisions that no longer apply.

The OBBBA amended Code Sec. 36B(f)(2) to remove the repayment cap for tax years after 2025. Beginning in 2026, taxpayers must repay the full amount by which their advance credit payments exceed their PTC. This amount is added to the taxpayer's total tax liability, which will reduce the taxpayer's refund or increase his or her balance due.

According to the IRS, notifying the Marketplace about changes in family size or household income as soon as they occur will allow the Marketplace to update the information used to determine the taxpayer's expected amount of PTC and adjust his or her advance credit payment amount. This adjustment will decrease the likelihood of a significant difference between the taxpayer's advance credit payments and his or her actual PTC. Changes in circumstances that can affect the actual PTC amount include:

(1)increases or decreases to household income (e.g., lump sum payments of Social Security benefits, including Social Security Disability Insurance; lump sum taxable distributions from an individual retirement account or other retirement arrangement; realizing capital gains, including sales of stocks, bonds, or cryptocurrency; or debt forgiveness or cancellation, such as the cancellation of credit card debt);

(2)marriage;

(3)divorce;

(4)birth or adoption of a child;

(5)gaining or losing eligibility or government sponsored or employer sponsored health care coverage; or

(6)moving to another address.

The FAQs also address the expiration of the temporary rule that allows taxpayers with household income of more than 400 percent of the federal poverty line to qualify for the PTC. The temporary rule has not been extended. Thus, beginning January 1, 2026, only taxpayers whose household income equals or exceeds 100 percent but does not exceed 400 percent of the federal poverty line for their family size will qualify for the PTC.

For a discussion of the PTC , see Parker Tax ¶102,600.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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