Understanding Health Insurance Tax Credit Repayment: What You Need to Know for 2025 & 2026
How Overestimating or Underreporting Income Can Cost You
Let’s talk about something not enough people are warned about when signing up for health insurance through the marketplace: repaying tax credits. If your estimated income changes — or if your tax filing status doesn’t match your application — you could owe hundreds or even thousands back to the IRS.
I want you to be informed and confident going into tax filing for 2025 and 2026, so let's go over what’s changing and how to protect yourself.
Case Study: Jocelyn’s Costly Mistake
Meet Jocelyn. She lives in Virginia with her husband and two kids. When she applied for coverage, she reported only her income of $40,000 — but her husband also made $65,000.
Here’s the problem: the marketplace calculates subsidies based on total household income, not just the income of the person applying. That made Jocelyn eligible for way more tax credits than she should’ve gotten.
Now? She has to repay those excess credits at tax time.
Filing Status Matters More Than You Think
Another major issue? Jocelyn’s application said she and her husband were filing jointly, but they actually filed separately.
That’s a huge deal — because married couples filing separately do not qualify for tax credits. So any subsidy she received is essentially invalid. She’s on the hook to pay it back.
Moral of the story: Double-check your application. Filing status, income, dependents — all of it matters.
What Are Premium Tax Credits, Anyway?
Let’s simplify it.
PTCs (Premium Tax Credits) are government subsidies to reduce your monthly health insurance costs.
You can receive them in advance (APTCs) to lower your monthly premium.
They’re calculated based on your estimated household income and tax filing status.
If your income ends up being higher than what you reported, or your status changes (like getting married or divorced), you might have to repay some or all of those credits.
The Repayment Caps for 2025
For the 2025 tax year (filed in 2026), there are still repayment caps in place. Here’s how they work:
Income as % of Federal Poverty Level (FPL)Max Payback Amount (2025)< 200%$375 - $750200% - 300%Up to $1,500 - $2,000300% - 400%Around $3,000> 400%Full repayment
So, let’s say you got $800/month in tax credits — that’s $9,600 a year. If you were only supposed to get $2,000, that’s a $7,600 difference. With caps in place, you might only owe part of that.
No Caps in 2026: Full Repayment Ahead
Here’s the big shift:
In 2026 (when filing taxes in 2027), those repayment caps go away.
So using the same example — if you received $9,600 but were only eligible for $2,000 — you’ll owe all $7,600 back. No limits. No protections.
Plan accordingly.
How to Protect Yourself
Let’s keep you out of that mess. Here’s what to do:
✅ Report Accurate Income
Use:
Your most recent tax return
Recent pay stubs
Estimates that include all household earners
✅ Update Your Marketplace App
Income changed? Got married? Had a baby? Update your application. Don’t wait until tax season.
✅ Review Your Application Carefully
Even if an agent helped you, log in and double-check it yourself. Look at income, tax filing status, and dependents.
✅ Save a Cushion
If you’re unsure, set aside money in case you have to repay a portion.
✅ Consult Licensed Professionals
Tax advisors may suggest filing separately — but know that can disqualify you from all tax credits. Weigh the pros and cons carefully.
Final Thought: Be Proactive, Not Reactive
If there’s one thing I want you to walk away with, it’s this: stay on top of your application throughout the year. Life changes — income shifts, family situations evolve. But the IRS? They don’t care if it was a mistake. If you got too much help, they want their money back.
By planning ahead, you can avoid surprises and potentially save thousands.
