Treasury and the IRS have proposed, but not adopted, rules that would limit premium tax credits to U.S. citizens, U.S. nationals and certain lawfully present noncitizens from 2027. Nothing in the proposal is in force yet: comments are due November 30, and a telephone hearing is set for December 8. The premium tax credit is the refundable credit that helps people afford health plans bought through the exchanges.
What the proposal says and what is not law yet
The Treasury and the IRS announced the proposal on October 14 in release IR-2026-121. It lists three parts. Beginning in 2027, subsidies would go only to people who qualify under federal law. Eligibility would be restricted to citizens, nationals and certain lawfully present noncitizens. New checks and verification criteria would apply to any advance payments of the credit.
“The proposed rules protect eligible taxpayers while strengthening the integrity of the Premium Tax Credit,” IRS Chief Executive Officer Frank J. Bisignano said. Treasury Secretary Scott Bessent said the rules close eligibility loopholes.
The Federal Register published the proposal on October 15, in volume 91, at page 65494, under docket REG-101576-26. The IRS calls the underlying law the Working Families Tax Cuts, and the notice calls it the One, Big, Beautiful Bill Act. Most eligibility and computation changes would apply to taxable years beginning after December 31, 2026, and the verification rules after December 31, 2027.
New verification, narrower income rules and the repayment cap
For any month with advance payments, the exchange would have to verify the enrollee’s residence, citizenship or lawful presence, household income and family size, and whether other coverage is available. Where it applies, it would also have to verify “eligible alien” status, according to the proposed regulation’s text. Under the proposal, a month in which the exchange does not verify is not a coverage month for the credit, starting with taxable years after 2027.
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People who do not ask for advance payments would need only the enrollment items verified. A waiver would cover enrollments in special enrollment periods triggered by family-size events, which the text lists as a newborn, an adoption, a marriage, or the loss of a dependent through death or divorce.
The proposal restates who counts as an applicable taxpayer: household income generally between 100 percent and 400 percent of the federal poverty level, enrolled in a plan through an exchange. It describes two immigration-related limits. For taxable years after 2025, a lawfully present immigrant with income below 100 percent of the poverty level who is ineligible for Medicaid because of immigration status no longer qualifies.
From taxable years after 2026, family members who are lawfully present but are not “eligible aliens” would be left out of the premium and income calculations. “Eligible alien” is defined in section 36B(e)(2)(B) of the tax code, which the proposal cites.
The proposal also deals with repayment. The law removed the cap on how much excess advance payment a household must repay, effective for taxable years after 2025, and the proposed rule would carry that into the regulations for years beginning on or after October 15, 2026. A household whose income comes in above its estimate would have no cap on what it owes back.
A second proposal from CMS covers the exchanges
The IRS release says HHS will address exchange procedures and verification in parallel proposed regulations, and CMS followed on October 23. That proposal would require consumers seeking advance payments or income-based cost-sharing reductions to pass eligibility verification before they receive them, starting with 2028 plans.
People already enrolled would be re-enrolled with financial help only if they return each year to confirm certain criteria. Otherwise they would be re-enrolled without it. CMS Administrator Dr. Mehmet Oz said federal subsidies “should only go to eligible Americans, not to fraudsters gaming the system.” Comments run 30 days after Federal Register publication.
The requirements would apply to consumers who apply for or receive advance payments, at initial enrollment and again at annual re-enrollment. A voluntary window would let consumers verify information early, opening each August 1, with the first on August 1, 2027, for 2028 coverage. CMS says people who do not apply for financial help would not be affected. Open Enrollment for the coming year starts November 1 on HealthCare.gov.
Would a household’s subsidy survive the new checks?
That depends on documents and on a final rule that does not exist yet. Anyone who wants to be heard can send comments through regulations.gov, docket IRS-2026-1420, by November 30. Requests to speak at the December 8 hearing, at 10 a.m. Eastern, are also due November 30, and requests to attend are due by 5 p.m. Eastern on December 4. The IRS lists publichearings@irs.gov for hearing questions and submissions.
The open question for a household that buys coverage with a subsidy is which of the proposal’s checks would apply to it, and in which year. The eligibility limits begin with 2027 taxable years, while the full verification step starts a year later.
Would a household’s subsidy survive the new checks?
The proposal ties the credit to household income between 100 and 400 percent of the poverty level and removes the cap on repaying excess advance payments. A household that estimates its income badly can owe the difference in full at tax time.
The proposal is about who qualifies, and the related job is the income side of the question. The Retirement Tax & Withdrawal Planner has four calculators (provisional income, IRMAA tier, RMD schedule, Roth bracket fill) and the senior deduction. It does not compute the premium tax credit, which stays with HealthCare.gov.
Run the provisional-income and withdrawal-order numbers in the retirement tax planner →
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
