The Premium Tax Credit and Form 8962 Reconciliation

The premium tax credit is the benchmark Silver plan’s premium minus the share of household income the 2026 applicable percentage table¹ sets. Form 8962 reconciles the advance payments against the credit you were actually allowed.

The COBRA vs Marketplace calculator runs that subtraction for a coverage year, a household size and a state. This page explains the pieces and the filing step that follows.

The four inputs

Input	Where it comes from
Household income	Modified AGI for the tax family, per the Form 8962 instructions
Family size	The tax family: you, a spouse on a joint return, and claimed dependents
Federal poverty line	Use the guidelines in effect when open enrollment for that coverage year opened2
Applicable percentage	The IRS table for the coverage year

The benchmark itself is the fifth input. The Form 8962 instructions define it as “the second lowest cost silver plan (SLCSP) premium offered through the Marketplace where you reside that applies to your coverage family”.

How the amount is worked out

Household income is expressed as a percentage of the federal poverty line. The applicable percentage for that position is read off the table for the coverage year and applied to household income. The result is the annual contribution. The credit is the benchmark premium minus that contribution, and it is never negative.

Example. A hypothetical household of one in the contiguous states prices 2026 coverage at 250% of the poverty line, which is $39,125 of household income. The 2026 applicable percentage at that point is 8.44%, so the annual contribution is $3,302 and the monthly contribution about $275. Against a hypothetical benchmark premium of $600 a month, the credit is about $325 a month.

The credit is a dollar amount, not a discount rate. It can be applied to a plan at any metal level, so a cheaper plan than the benchmark leaves a smaller net premium and a more expensive one a larger net premium.

Advance payments and the reconciliation

Most people take the credit in advance, as a monthly payment made to the insurer. The IRS describes the year-end step: “Use the information from Form 1095-A to complete Form 8962 to reconcile your advance payments of the premium tax credit with the premium tax credit you are allowed on your tax return.”

The Form 8962 instructions set out who must file. You file the form if you are taking the credit, or if advance payments were made “for you or another individual in your tax family”. The form is required even where the advance payments turn out to be exactly right.

When the income estimate turns out wrong

The advance payment is based on an estimate made before the year begins. Two outcomes follow at filing.

If income came in lower than estimated, the allowed credit is larger than what was paid in advance, and the difference reduces tax or increases a refund. If income came in higher, there is excess advance credit, and the IRS states that “you will add all – or a portion of – the excess APTC to your tax liability on Form 1040, Schedule 2.”

Reporting changes to the Marketplace during the year moves the advance payments rather than the final answer. The IRS puts the consequence of not doing so plainly: “If you don’t report the change and your advance credit payments are more than the premium tax credit you are allowed, you have to reduce your refund or increase the amount of tax you owe by all or a portion of the difference when you file your federal tax return.”

The limit on repayment

There is a cap on how much excess advance credit has to be repaid, and it depends on income. The IRS states the rule this way: “the amount of your excess APTC that increases your tax liability may be limited if your household income is less than 400 percent of the applicable federal poverty line, but you will have to repay all of the excess APTC if your household income is 400 percent or more of the applicable federal poverty line.”

The dollar amounts of those caps sit in Table 5 of the Form 8962 instructions and vary by filing status and by income band. Read them from the instructions for the tax year you are filing, because they are indexed.

What blocks the credit outright

No premium tax credit above 400% of the federal poverty level³ — the position the 400% subsidy cliff page sets out, together with the legislative status: Expired — not extended (no law enacted as of September 6, 2026)⁴.

An offer of employer coverage also blocks it, if the offer is affordable and meets minimum value. Affordability is measured against the required contribution percentage, which is 9.96%⁵ for plan years beginning in 2026.

What is the premium tax credit?

It is a refundable federal tax credit that reduces the cost of a Marketplace health plan. Its size is the benchmark Silver plan’s premium minus the share of household income the IRS applicable percentage table sets for your income.

What is Form 8962 for?

It reconciles the advance credit payments made to your insurer during the year against the credit you were entitled to once your actual income is known. The IRS requires it from anyone taking the credit or on whose behalf advance payments were made.

What happens if I underestimate my income?

The advance payments were too large, and the excess is added to your tax liability on Schedule 2 of Form 1040. Part of it may be capped, but only where household income stays below 400 percent of the applicable federal poverty line.

What happens if I overestimate my income?

The credit you were allowed is larger than what was paid in advance, and the difference is settled in your favor on the return. There is no cap in that direction.

Is there a limit on how much I have to repay?

Yes below 400 percent of the poverty line, and no at or above it. The IRS states that repayment “may be limited” under that threshold, but that “you will have to repay all of the excess APTC” at or above it.

Which plan decides the size of my credit?

The second lowest cost Silver plan available to your coverage family in your area. It is a benchmark for pricing only; the credit can then be used on a plan at any metal level.