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Repayment caps eliminated for excess advance payments of the Premium Tax Credit

 
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The Working Families Tax Cuts Act made several changes to the Premium Tax Credit (PTC). One key change is the removal of the repayment limitation. Beginning with tax year 2026, the taxpayer must repay the full amount of any excess advance payments of the premium tax credit (APTC). The repayment limits that previously capped how much taxpayers had to pay back no longer apply. To avoid a balance due or reduced refund, taxpayers must promptly report changes to the Marketplace.

What is APTC? 

APTC is a payment to an insurance provider for part or all of the premiums for a qualified health plan covering a taxpayer or an individual in their tax family. The APTC eligibility is based on the Marketplace’s estimate of their PTC. If the insurance provider received APTC on behalf of the taxpayer or an individual in their tax family, the taxpayer must file Form 8965 , Premium Tax Credit PDF, to reconcile the APTC with their PTC.

If the APTC is less than the PTC, the taxpayer can get a credit for the difference, which reduces their tax payment or increases their refund. If the APTC is more than their PTC, the taxpayer has excess APTC and must repay the entire amount. Repayment limits for excess APTC no longer apply. 

What changes should taxpayers report to the Marketplace?

Reporting changes in circumstances promptly allows the Marketplace to adjust the APTC to reflect the estimated PTC claimed on the tax return. Adjusting APTC during the year and when re-enrolling in coverage can help avoid owing tax when filing a tax return. Changes to report to the Marketplace include the following:

  • Household income
  • Address changes
  • Employment status (gaining, losing, or other changes)
  • Health care coverage (gaining or losing eligibility)
  • Birth or adoption
  • Marriage or divorce
  • Other changes affecting the composition of the tax family

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