ACA subsidies explained

How the credit is calculated

The premium tax credit has one formula, and it has not changed in structure since 2014:

Your credit = the premium of the second-lowest-cost silver plan available to your household, minus your required contribution, where your required contribution is household MAGI multiplied by an applicable percentage set by the IRS.

You may then apply that dollar credit to any metal tier the marketplace offers. Buy a cheaper bronze plan and you keep the difference as a lower premium; buy gold and you pay the extra yourself. The credit amount never exceeds the actual premium of the plan you pick.

For taxable years beginning in 2026, IRS Revenue Procedure 2025-25 sets the applicable percentage table. That is the schedule the enhanced credits temporarily overrode from 2021 through 2025, and it is back in force for the 2026 plan year.

The 2026 applicable percentage table

These are the shares of household income you are expected to pay toward the benchmark plan for 2026, per Revenue Procedure 2025-25. Within each band, the percentage rises on a sliding scale from the initial to the final figure.

The same revenue procedure sets the required contribution percentage used for employer-coverage affordability at 9.96% for plan years beginning in 2026. If your share of the cheapest self-only employer plan costs less than 9.96% of household income and the plan meets minimum value, you are generally locked out of marketplace credits.

The FPL bands in dollars

Subsidy eligibility for a coverage year uses the poverty guidelines published in the prior year. For 2026 coverage that means the 2025 guidelines, which HealthCare.gov lists as $15,650 for one person and $32,150 for a family of four in the 48 contiguous states and DC. The 2026 guidelines, which will govern 2027 coverage, rose to $15,960 and $33,000. Alaska and Hawaii use higher figures.

Below 100% of poverty, federal marketplace credits generally are not available. In the states that expanded Medicaid, adults under 138% of poverty typically qualify for Medicaid instead. In the states that did not expand, adults below 100% can fall into a coverage gap with no affordable option, which is a policy failure rather than something you can plan around.

Why the benchmark plan drives everything

Your credit is anchored to the second-lowest-cost silver plan in your rating area, not to the plan you buy. If a low-cost insurer enters your county, the benchmark drops and so does your credit, even if your own plan's price did not move. If insurers exit, the benchmark rises and your credit grows.

KFF put the 2026 US average benchmark premium at $625 a month, against $611 for the average lowest-cost silver plan, $456 for the average lowest-cost bronze plan and $615 for the average lowest-cost gold plan. Because gold sometimes prices below benchmark silver, a subsidized buyer can occasionally get gold-level cost sharing for a silver-level payment. Always price all four tiers with the credit applied.

Geography dominates. Congressional Research Service figures for 2026 show a 50-year-old facing a benchmark premium of $541 a month in Anoka County, Minnesota, $1,053 in Smith County, Kansas and $1,785 in Monroe County, Florida. Identical income, three completely different credits.

Cost-sharing reductions, the quieter subsidy

Premium tax credits lower your monthly bill. Cost-sharing reductions lower your deductible, copays and out-of-pocket maximum, and they are available only if you enroll in a silver plan and your income falls between 100% and 250% of poverty.

KFF describes the 2026 effect this way: a typical silver plan carries an annual out-of-pocket maximum of about $10,600, but with cost-sharing reductions that cap falls to no more than $3,500 for incomes up to 200% of poverty and to no more than $8,450 between 201% and 250%.

Cost-sharing reductions are not claimed on your tax return and are not reconciled. They are applied by the insurer through a modified version of the silver plan, so the benefit shows up as better plan terms rather than as money.

What changed for 2026

The American Rescue Plan Act of 2021 temporarily enlarged the credits and removed the 400% income ceiling, and the Inflation Reduction Act extended those terms through the 2025 tax year. They were not extended again, so the 2026 plan year runs on the pre-2021 rules.

Three concrete consequences:

• The 400% cliff is back. A single filer earning more than $62,600 for 2026 coverage gets no credit at all, no matter how expensive the benchmark plan is in that county.
• Everyone pays a larger share. The applicable percentages for 2026 top out at 9.96%, compared with a maximum of 8.5% under the enhanced rules, and the bottom band is 2.10% rather than zero.
• Net premiums rose sharply. KFF found the average amount enrollees actually pay rose 58%, from $113 to $178 a month, and that sign-ups fell by over a million people to roughly 23 million.

Households just above the cliff absorbed the worst of it. KFF reported that people at 400% of poverty or higher, about 7% of 2025 enrollment, accounted for nearly half of the decline in plan selections for 2026. Congress could change this again; treat the current rules as the law for this plan year, not as permanent.

Estimating income without shooting yourself in the foot

The marketplace asks for projected household modified adjusted gross income for the coverage year. HealthCare.gov defines MAGI as adjusted gross income plus untaxed foreign income, nontaxable Social Security benefits and tax-exempt interest. It is not a line on your return, so you have to build the estimate.

Practical method: start with last year's AGI, then adjust for known changes such as a raise, a job change, a spouse leaving work, self-employment swings, capital gains you intend to realize, and deductible contributions you intend to make to a traditional IRA, a solo 401(k) or an HSA. Those deductions reduce MAGI, which is why they are the main lever people near the cliff can still pull.

• Include everyone on the tax return. Household means your tax household, including dependents with income, not just people on the policy.
• Report changes as they happen. The IRS instructs enrollees with advance credits to report life changes to the marketplace during the year so the credit amount stays accurate.
• Watch year-end income. A December bonus or a large realized gain can cross the 400% line and cost you the entire year of credits.
• Self-employed, estimate high-ish. It is easier to receive a refund at filing than to repay credits you already spent.

Reconciliation at tax time

Most people take the credit in advance, as advance payments of the premium tax credit paid directly to the insurer each month. The IRS requires anyone who received advance payments in any amount to file a return with Form 8962 to reconcile what they received against what their final income entitled them to.

If your actual income came in lower than projected, you claim the extra credit as a refundable amount. If it came in higher, you generally repay the excess, subject to statutory repayment caps that depend on income and filing status. Households that end the year above 400% of poverty typically repay all advance credits received for that year, which is the single most expensive tax surprise in the individual market.

Other filing rules to know: you generally cannot claim the credit filing married separately, apart from a narrow exception for victims of domestic abuse or spousal abandonment; you cannot be claimed as someone else's dependent; and you must not be eligible for affordable minimum-value employer coverage, Medicaid, Medicare, CHIP or TRICARE for the same month. Our cost guide shows how those credits translate into monthly premiums.