[Updated on July 5, 2025, with changes from the 2025 Trump tax law.]
The ACA medical health insurance subsidy, aka the premium tax credit score, is ready up such that, for essentially the most half, it doesn’t matter how a lot subsidy you obtain upfront while you enroll. The upfront subsidy is barely an estimate. The ultimate subsidy shall be squared up while you file your tax return subsequent yr.
For those who didn’t obtain the subsidy while you enrolled however your precise revenue qualifies, you get the subsidy as a tax credit score while you file your tax return. If the federal government paid extra subsidies than your precise revenue qualifies for, you pay again the distinction in your tax return.
Reimbursement Cap
There’s a cap on how a lot you’ll want to pay again. The cap varies relying in your Modified Adjusted Gross Earnings (MAGI) relative to the Federal Poverty Degree (FPL) and your tax submitting standing. It’s additionally adjusted for inflation every year. Listed here are the caps on paying again the subsidy for 2025 and 2026.
| MAGI | 2025 Protection | 2026 Protection |
|---|---|---|
| < 200% FPL | Single: $375 Different: $750 |
No Cap |
| < 300% FPL | Single: $975 Different: $1,950 |
No Cap |
| < 400% FPL | Single: $1,625 Different: $3,250 |
No Cap |
| >= 400% FPL | No Cap | No Cap |
Supply: IRS Rev. Proc. 2024-40.
The brand new 2025 Trump tax legislation eradicated the compensation cap, efficient in 2026, no matter revenue. 2025 is the final yr {that a} compensation cap nonetheless applies.
No Cap Above 400% of FPL
The compensation caps in 2025 apply solely when your precise revenue is beneath 400% of FPL. There’s no compensation cap in case your precise revenue exceeds 400% of FPL — you’ll have to pay again 100% of the distinction between what you acquired and what your precise revenue qualifies for.
There is no such thing as a compensation cap in 2026 or past.
Giant Change in Earnings
The caps are additionally set sufficiently excessive such that the quantity you’ll want to pay again will fall beneath the cap until there’s an enormous distinction between your precise revenue and your estimated revenue on the time of enrollment.
For instance, suppose you’re married submitting collectively and also you estimated your revenue can be $50,000 in 2025 while you enrolled. Suppose by the point you file your tax return, your revenue seems to be $60,000. As a result of your revenue is $10,000 increased than you initially estimated, you qualify for a decrease subsidy now. You may be required to pay again the $1,554 distinction. The cap doesn’t actually enable you as a result of this $1,554 distinction is effectively underneath the $3,150 compensation cap.
As well as, since you’re required to inform the healthcare market of your revenue adjustments through the yr in a well timed method in order that they’ll regulate your advance subsidy, usually the distinction between the advance subsidy you acquired and the subsidy you lastly qualify for ought to be effectively underneath the cap. The cap helps solely when your revenue will increase near the tip of the yr, and it’s too late to regulate your advance subsidy.
Simpler for Singles
Nonetheless, a late revenue change can occur, and the change will be massive sufficient to make the distinction within the medical health insurance subsidy increased than the compensation cap. That is true particularly while you’re single with a decrease compensation cap.
For instance, suppose you’re single and also you estimated your revenue can be $30,000 in 2025 while you enrolled. Suppose in December 2025 you resolve to transform $20,000 from a Conventional IRA to a Roth IRA. This pushes your revenue to $50,000. The additional $20,000 revenue lowers your medical health insurance subsidy by $2,809, however as a result of your compensation cap is $1,625, you solely must pay again $1,625. You get to maintain the opposite $1,184. On this case, you’re higher off asking for the subsidy upfront throughout enrollment. For those who solely wait till you file your tax return, you received’t profit from the compensation cap.
Backside line: It’s best to attempt to estimate your revenue conservatively and qualify for as a lot subsidy as you may upfront while you enroll for 2025. Possibly it received’t assist. Possibly it’ll. There received’t be any distinction beginning in 2026, since you’re required to pay again 100% of the distinction while you do your taxes.
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