If you received an advance premium tax credit during the year to help pay for Marketplace coverage, you will need to reconcile it when you file your federal tax return. This means comparing the advance credit you used to the credit you were actually entitled to, based on your real income. If your income was higher than you estimated, you may owe some back. If it was lower, you may get additional money back as part of your refund.
At a glance
- Reconciliation happens on your federal tax return using IRS Form 8962.
- If your actual income was higher than your estimate, you may need to repay part or all of the advance credit. Starting with tax year 2026, repayment is generally no longer capped.
- If your actual income was lower, you may receive an additional credit.
What reconciliation is
When you applied for Marketplace coverage, you estimated your income for the year. The Marketplace used that estimate to calculate your advance premium tax credit (APTC), which was applied to your monthly premium. Reconciliation is the process of comparing that advance amount to the credit you actually qualify for based on your real income, as reported on your tax return.
Think of it as a true-up. The advance payments were based on a projection. Your tax return uses the actual numbers.
Form 8962 basics
You reconcile your premium tax credit by completing IRS Form 8962, Premium Tax Credit, and filing it with your federal tax return. You will need:
- Form 1095-A (Health Insurance Marketplace Statement), which the Marketplace sends you by early February. It shows your enrollment months, the premiums for your plan and the benchmark plan, and the advance credit amounts paid on your behalf.
- Your actual income information for the tax year.
Form 8962 walks through the calculation: it determines your allowable credit based on actual income, compares it to the advance credit you received, and produces either a repayment amount or an additional credit.
Important: You must file Form 8962 even if you think nothing changed. If you received advance credits and do not reconcile, the IRS may block future advance credits until you do.
What happens if your income was higher
If your income ended up higher than you estimated, your allowable credit is smaller than what you received in advance. You may need to repay the difference.
Through tax year 2025, repayment caps limited how much many households with income below 400% of the federal poverty level (FPL) had to repay. Starting with tax year 2026, there is no repayment cap: you generally must repay the full amount by which your advance credits exceeded the credit you actually qualify for, regardless of income level.
If your income ends up above 400% FPL for 2026 or a later year, you generally do not qualify for any credit for that year and must repay all advance credits you received. Check the current year's Form 8962 instructions for the rules that apply to your return.
What happens if your income was lower
If your actual income was lower than you estimated, you may have received less in advance credits than you were entitled to. In that case, the additional credit is applied to your tax return, either reducing the tax you owe or increasing your refund.
What happens if you did not file
If you received advance premium tax credits and do not file a federal tax return with Form 8962, the IRS may:
- Send you a notice requesting the form.
- Withhold advance credits for future years until you reconcile.
- Adjust your return and calculate the repayment on your behalf, which may not be in your favor.
Even if your income was very low and you would not normally be required to file, you generally need to file if you received advance credits.
Reporting income changes during the year
The single best way to minimize reconciliation surprises is to update your income estimate with the Marketplace whenever it changes significantly. You can do this at any time through HealthCare.gov or your state exchange.
When you report a change, the Marketplace adjusts your advance credit going forward. This keeps the advance amount closer to what you will actually qualify for, which means a smaller adjustment at tax time.
Changes worth reporting include:
- Getting a new job or losing one
- A significant raise or reduction in pay
- Starting or stopping self-employment
- Gaining or losing unemployment benefits
- Changes in other income sources (investments, Social Security, retirement withdrawals)
Special situations
Getting married during the year: Your household income and size change, which affects your credit. If both spouses had separate Marketplace plans with separate advance credits, the reconciliation combines everything on a joint return. This can sometimes result in a repayment if combined income is higher than either person estimated individually.
Getting divorced during the year: Only the income and advance credits attributable to your own coverage and your dependents are reconciled on your return. Your former spouse reconciles theirs separately.
Household size changes: Adding or losing a dependent during the year changes both your household size and potentially your household income. These changes affect the credit calculation.
Moving to a different state or county: Your benchmark plan cost may change, which affects the credit amount. Report address changes to the Marketplace promptly.
In any of these situations, consider consulting a tax professional, since the Form 8962 calculation can become more complex with mid-year household changes.
How to avoid large repayments
- Estimate income carefully at application time. Use your most recent tax return as a starting point and adjust for known changes.
- Update the Marketplace whenever your income or household situation changes during the year.
- Review mid-year. Even if nothing dramatic has changed, checking your income trajectory around mid-year can catch slow-moving changes (a series of small raises, more freelance work than expected).
- Consider taking less than the full advance credit. You can choose to apply only part of the estimated credit to your monthly premium and claim the rest at tax time. This reduces the risk of overpayment but means higher monthly premiums during the year.
What to do next
Primary action: If you had Marketplace coverage this year, make sure you have your Form 1095-A and review it for accuracy before filing your return. Alternative: Learn more about how to estimate your income for a Marketplace application to get your credit amount right from the start.
This article provides general educational information, not legal, tax, or financial advice. Plan availability, pricing, subsidies, and benefits depend on individual circumstances, location, and the current plan year, and may change. For complex tax situations, consult a qualified tax professional.
Sources
- IRS, Form 8962 instructions, https://www.irs.gov/forms-pubs/about-form-8962 (opens in a new tab)
- IRS Publication 974, "Premium Tax Credit," https://www.irs.gov/publications/p974 (opens in a new tab)
- HealthCare.gov, "How to reconcile your premium tax credit," https://www.healthcare.gov/taxes-reconciling/ (opens in a new tab)
