Premium tax credit vs. cost-sharing reduction
The premium tax credit lowers your monthly premium. A separate benefit, the cost-sharing reduction, lowers deductibles and copays, but only for Silver-plan enrollees with household income between 100% and 250% of the federal poverty level (FPL). You can qualify for one, both, or neither, depending on income and the plan you pick.
How the credit is calculated
The Marketplace identifies your area’s benchmark plan, the second-lowest-cost Silver plan available to your household, then calculates your expected contribution as a percentage of modified adjusted gross income (MAGI) on a sliding scale. For 2026, these amounts are:
| % of federal poverty level | Expected contribution |
|---|---|
| Under 133% | 2.1% |
| 133%–150% | 3.14%–4.19% |
| 150%–200% | 4.19%–6.6% |
| 200%–250% | 6.6%–8.44% |
| 250%–300% | 8.44%–9.96% |
| 300%–400% | 9.96% |
Source: Internal Revenue Service
The credit equals the benchmark premium minus that expected contribution. Say a benchmark plan costs $500 a month and your expected contribution is $200: $500 − $200 = $300 in monthly credit, whether you apply it in advance or claim it later.
Advance payments vs. claiming it later
You can have the advance premium tax credit (APTC) paid directly to your insurer each month, which lowers the bill right away. Alternatively, you could skip the advance, paying for your health insurance premium out of pocket, and claim the entire credit when you file.
Why your income estimate matters
Because APTC is estimated at the beginning of the year, income earned that is greater than or lower than the estimate changes the amount of the PTC you are eligible to claim. This difference between the APTC and the PTC will either increase or decrease the taxes that you pay or the refund you receive. If you earned more than projected, you may repay some of the advance payments; earn less, and you may get an additional credit on your return.
The 400% cutoff
The cutoff is back for tax year 2026 and beyond, although it was temporarily halted from 2021 to 2025. With the cutoff, income above 400% of the federal poverty level disqualifies a household from the credit entirely.
Reporting it: Form 1095-A and Form 8962
Marketplace enrollees get Form 1095-A by January 31, showing premiums paid and any advance credit. You’ll use it to complete Form 8962, which reconciles advance payments against your actual credit and flows to Schedule 3.
