Excess Obamacare Subsidies Are Repaid in Full: No Form 8962 Repayment Cap Starting with Tax Year 2026

Starting with tax year 2026, there is no cap on repaying excess advance premium tax credit (APTC) from an Obamacare plan. When you file your 2026 return in spring 2027, you reconcile Form 1095-A on Form 8962 using your actual income and repay whatever was overpaid; if your income ends up above 400% of the poverty line, the full year's advance credit is repaid. If you received too little, you still get the difference as a refundable credit.

What changed

When you enroll in a Marketplace plan, the exchange uses your income estimate to pay part of your premium directly to the insurer each month. That's the advance premium tax credit. If your actual income for the year differs from the estimate, you settle up on Form 8962 when you file.

Until now, households below 400% of the poverty line had a repayment cap: depending on income and filing status, repayment topped out somewhere between a few hundred and a few thousand dollars, and anything above that was forgiven. Section 71305 of the One Big Beautiful Bill Act, signed July 4, 2025, eliminated the cap for tax years beginning after December 31, 2025. Coverage for 2026 is the first year reconciled under the new rule. Treasury and the IRS estimate that about 3.7 million returns in 2028 will include an excess APTC repayment.

Combine that with the expiration of the enhanced subsidies at the end of 2025, which means no credit at all above 400%, and a modest underestimate of income can turn into a large bill at tax time.

How reconciliation works

Form 1095-A: The exchange sends it by January 31. For each month it shows three columns: A, your plan's premium; B, the benchmark silver plan premium; and C, the advance credit paid. Download it from your exchange account and check every month, especially months when someone was added or dropped, you moved, or you changed plans.

Form 8962: Using actual household income (MAGI), you figure income as a percentage of the poverty line, look up the expected contribution percentage, compute the credit you were entitled to, and compare it with the advance payments in column C. Any excess is added to your tax on Schedule 2; any shortfall is claimed as a refundable credit on Schedule 3.

You must file: If you received advance credit, you must file a return with Form 8962 even if your income is below the filing threshold. If you don't, the IRS will write asking for the form and may hold your refund.

Example

Example (hypothetical numbers, to show the method): A single self-employed person in North Carolina buys a 2026 plan on HealthCare.gov and estimates MAGI of $45,000. Coverage for 2026 uses the 2025 poverty guidelines: $15,650 for one person, so the 400% line is $62,600. Assume the local benchmark silver plan costs $600 a month, or $7,200 a year.

At application: $45,000 is about 287% of the poverty line. The 2026 expected contribution is about 9.56%, or $4,304, so the advance credit is about $2,896 for the year.

Actual income of $60,000: About 383%, an expected contribution of 9.96%, or $5,976, and an allowed credit of $1,224. The repayment is $2,896 minus $1,224, or $1,672. This income range used to have a cap; it no longer does.

Actual income of $65,000: Above the 400% line, so no credit at all, and the full $2,896 is repaid.

Actual income of $35,000: About 223%, an expected contribution of about 7.45%, or $2,606, and an allowed credit of $4,594. That's $1,696 more than was paid in advance, refunded as a credit at tax time.

What you can still do before filing

Run the numbers first. If income came in higher than estimated, figure the repayment before April 15 and set the cash aside. If you can't pay it all at once, you can request an IRS payment plan, though interest applies.

Lower MAGI legitimately. Traditional IRA and HSA contributions for 2026 can be made until the April 15, 2027 filing deadline, and both reduce 2026 MAGI. Starting in 2026, Marketplace bronze plans are HSA-compatible. If your income landed just above the 400% line, this step can decide whether you repay all of the credit or only part of it. Whether a traditional IRA contribution is deductible depends on whether you're covered by a workplace retirement plan.

If you're self-employed, the self-employed health insurance deduction and the credit affect each other and are figured together under IRS Publication 974; tax software or your CPA handles the calculation.

Looking ahead to 2027

Report income changes right away. When income, household size, address or status changes, report it to the exchange promptly (generally within 30 days) so it can recalculate your advance credit.

Take less in advance. You can choose to have only part of the credit paid in advance and claim the rest when you file, which lowers the risk of a year-end bill.

Raise withholding or estimated tax. If you expect to repay, increase paycheck withholding or quarterly estimated payments; see estimated tax payments.

Status changes. From 2027 the credit is limited to citizens, green card holders, Cuban and Haitian entrants and COFA migrants. H-1B, F-1 and other households that still receive advance credit in 2027 will repay it in full too.

More in the guide

How the credit is calculated, what income to enter, and how to fix an incorrect Form 1095-A are covered in our Obamacare 2027 guide. If you received advance credit last year and your income changed a lot, book a free 15-minute call or message us on WeChat at YCLUSA, and we'll help you work out Form 8962 before you file.