Starting with 2026 tax returns, people who bought health insurance on a federal or state marketplace could owe back every dollar of subsidy they were overpaid. No ceiling applies anymore. Treasury and the IRS published proposed rules on Oct. 15 that would write that into the regulations.
The rules are proposed, not final, and public comment is open until Nov. 30. The no-cap repayment itself is already in federal law. The IRS expects about 3.7 million tax returns in 2028 to include an overpayment repayment.
What the proposed rule would change
The proposal, titled “Premium Tax Credit,” appears in the Federal Register as document 2026-21056. It says Section 71305 of the One Big Beautiful Bill Act removed the limit on repaying excess advance payments of the premium tax credit for tax years beginning after Dec. 31, 2025.
The regulation would be revised to match. Its language says “a taxpayer’s tax liability for the taxable year of the coverage is increased by the full amount of the excess APTC.” APTC, the advance premium tax credit, is the monthly subsidy the marketplace sends to an insurer on a person’s behalf.
How the repayment works at tax time
Marketplace subsidies are paid in advance, based on an income guess made months earlier. At tax time the household reconciles that guess with its real income on Form 8962. If the advance was too big, the difference is the “excess.”
The IRS’s premium tax credit questions and answers spell out the old and new rules. Repayment caps could limit the amount for tax years before 2026, except 2020, for households under 400% of the federal poverty level. The page says: “There is no repayment cap for tax years after 2025.”
For those later years, the full excess is added to the household’s total tax liability. It reduces a refund or increases a balance due. Anyone who cannot pay the balance can ask the IRS about a payment arrangement, the page says.
That raises the question many marketplace households now face. Could an overpaid subsidy come back as a bill, and how large would it be? It equals the advance payments received minus the credit actually earned. By the IRS’s own example of a $250 monthly advance, that is $3,000 over a year. A household that ended up qualifying for $1,000 of credit would owe back $2,000.
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Who the rule reaches, and the form to file
Treasury estimates the whole rule would affect about 15.6 million people enrolled in marketplace coverage, including about 13.5 million who could be eligible for the credit. Those are the agency’s estimates for the proposal as a whole, not just the repayment piece.
Anyone who got advance payments has to file Form 8962 and attach it to a federal return, even someone who would not otherwise file, the IRS says. Form 1095-A, which the marketplace sends, usually arrives by early February and carries the figures needed to complete it.
The IRS adds that a person who does not file loses eligibility for advance payments in future years. That makes the form a gatekeeper for next year’s coverage as well as this year’s bill.
Other changes in the same proposal
Repayment is one part of a longer rule. Starting in 2028, the proposal says, a month counts as a coverage month only if the marketplace verified the enrollment and eligibility for advance payments. Lawfully present immigrants who are not “eligible aliens” would be excluded from the credit calculation starting with tax years beginning after Dec. 31, 2026.
One piece is aimed at helping families. The Secretary could waive verification for people who enroll after a family-size change such as a birth, adoption or marriage. Treasury estimates roughly 50,000 families with newborns would benefit, and about $22 million in advance credits could otherwise be delayed. The average monthly credit for a newborn’s coverage is about $222.
The proposal also treats people denied Medicaid only because they did not meet new community engagement requirements as having minimum essential coverage. Those months would not count as months without it.
Comments, and the Dec. 8 hearing
Comments are due Nov. 30 on regulations.gov under docket IRS-2026-1420, and the Federal Register notice says electronic filing is strongly encouraged. A telephone hearing is set for Dec. 8 at 10 a.m. Eastern. Requests to speak are due Nov. 30, and the hearing is cancelled if no outlines come in.
Technical questions go to Mia Romano at 202-317-4718. Hearing questions go to the IRS Publications and Regulations Section at 202-317-6901 or publichearings@irs.gov. Nothing in the proposal is final until Treasury publishes final rules.
Where the bill gets decided
The repayment cap is not the part still up for debate. The law already removed it, and the proposed rule would only bring the regulation into line. What households control is the estimate they give the marketplace and how they update it when income changes.
The question for anyone on subsidized coverage is whether this year’s income can swing. A retirement-account withdrawal, a sale of property or a spouse’s job change can each push it past the estimate. Under the new rule, every dollar of the difference comes back at tax time.
Could an income swing leave a bill on this year’s return?
A subsidy estimate that turns out too low can become a tax bill the size of the whole overpayment, with no ceiling, and it arrives after the year is over. Households with swinging income, such as a one-time retirement-account withdrawal, are the ones most likely to be caught out.
The Retirement Tax & Withdrawal Planner includes four calculators (provisional income, IRMAA tier, RMD schedule and Roth bracket fill) that show how a withdrawal or conversion moves a household’s taxable income. That is the number a subsidy estimate rests on, and it can be tested before the year closes.
Test a withdrawal against your income with the Retirement Tax & Withdrawal Planner →
More Financial Reading
- 21 Ways to Stretch a $2,087 Social Security Check
- 15 Places to Find Your Share of the $4.25 Billion States Give Back
- 17 Medicare Money Moves Now That Part D Caps at $2,400
This article was produced with the assistance of AI and reviewed by the editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
