Premium Tax Credit Calculator (ACA Subsidy)

From 2021 through 2025, nobody fell off a subsidy cliff. The American Rescue Plan removed the 400% income limit and capped what anyone paid for a benchmark silver plan at 8.5% of income, however much they earned. Those enhancements expired at the end of 2025.

For 2026 the original structure returns. Eligibility runs from 100% to 400% of the federal poverty line, and above 400% the credit is not reduced — it is gone. A household one dollar over the threshold pays the entire premium themselves.

The cliff is steeper now than when it last applied. Benchmark premiums have risen substantially since 2020, so the credit being forfeited is much larger in dollar terms. For an older couple in a high-cost area, crossing 400% of poverty can cost well over ten thousand dollars of credit for a single extra dollar of income. There is no provision that softens this; it is a genuine discontinuity in the tax code.

The credit is not calculated from the plan you buy. It is calculated from the second-lowest-cost silver plan available to your household in your area — the benchmark — and then applied to whatever plan you choose.

That has two consequences worth understanding. If you buy a plan cheaper than the benchmark, you keep the difference in the form of a lower net premium, and a large enough credit can bring a bronze plan to nothing. If you buy a plan dearer than the benchmark, you pay every dollar of the excess yourself, because the credit does not grow with your choice.

It also means the benchmark premium in your specific area is the single input that most affects your answer, and it is not something a calculator can know. Premiums vary enormously by county and by age. The figure has to come from healthcare.gov or your state exchange for your actual household.

Premium tax credits are usually taken in advance, paid directly to the insurer each month based on your projected income. At filing, Form 8962 reconciles the advance payments against the credit you actually qualified for.

Until 2025, if you underestimated your income and had to pay some back, the amount was capped on a sliding scale — a few hundred to a couple of thousand dollars depending on income and filing status. That cap is gone for tax years after 2025. The IRS is explicit: you must repay the full amount by which your advance payments exceed your credit.

Combine that with the restored cliff and the arithmetic becomes unforgiving. Someone who projects 390% of poverty, takes advance credits all year, and then earns a bonus that lands them at 405% does not repay a capped share — they repay the entire year of advance payments. Anyone with variable income near the threshold should consider taking less credit in advance than they are entitled to, and claiming the balance at filing instead.

The levers that reduce modified AGI are the same as elsewhere in the code — pretax retirement contributions, HSA contributions, a solo 401(k) for the self-employed — but near the cliff their value is extraordinary. A $1,000 contribution that moves you from just above to just below the threshold does not save you a marginal rate; it can restore the whole credit.