Tax time may come with a big surprise for some people who have Affordable Care Act coverage, which includes paying money back to the government for premium subsidies they received during the previous year.
There are more changes coming that make it important for subsidy recipients in 2026 to keep an eye on their income and take steps to protect themselves from that kind of financial hit.
First, the basics of how subsidies work.
Enrollees pay a percentage of their household income toward their health insurance premiums based on a sliding scale, ranging from nothing in 2025 for those with very low incomes to 8.5% at higher income levels. Subsidies, usually paid directly to insurers, cover the rest.
The income calculated during open enrollment is an estimate of what a household thinks it will earn in the coming year. At tax time, ACA enrollees must match the amount they received in subsidies and the amount they actually earned. If their income increases, they may have to pay back some of the subsidy.
But don’t skip filing! People who receive ACA subsidies must file tax returns no matter their income, and it’s becoming even more important: Trump administration already deleting People who have gone two consecutive years without filing have been excluded from eligibility for the subsidy and the government is proposing to reduce it to one year.
Beware of surprise tax bills
All enrollees who will receive subsidies for ACA coverage in 2025 – And more than 90% got at least some help – A special form needs to be included 8962With their tax filing. That form is used to match a person’s actual income and the amount of subsidies they received, with the IRS sending them the information separately, 1095-A Form. Subsidy amounts are based in part on income projections made when students enrolled in their ACA plans.
And this may surprise. Some people may find that they will get money back if their income is less than they anticipated. But, if their income goes above their initial or updated estimate, they may be eligible for less aid and have to pay the money back.
Groups that help people file taxes say it’s not always easy for people to accurately estimate their income for the coming year, especially for people who run their own businesses, work multiple jobs, or have varying hours.
Clients will say, “I could make anywhere between $20,000 and $45,000 next year. I don’t know,” said Katie Alexander, director of training and volunteers for the Health and Economic Opportunity program at Pisgah Legal Services, a western North Carolina nonprofit that provides free tax and health insurance assistance to low-income people.
However, for taxes being filed now for the 2025 tax year, have a hat How many people will have to pay?
The limit is $375 for a single person who earned less than $31,300 in 2025, or twice the federal poverty level. The maximum balance under that sliding scale for people whose income is at the high end of the range is $1,625 for an individual and $3,250 for a family.
There is no repayment limit for people earning more than four times the federal poverty level — a total of $62,600 for a single person or $106,600 for a family of three in 2025 — so they can repay all the amount over their eligibility.
“This amount is very surprising to people,” Alexander said.
One woman, whom Pisgah staff helped collect her taxes for 2025, earned a little more than $50,000, which was more than she initially anticipated. His repayment was limited to $1,625, Alexander said. Without that limit, he would have owed $4,000, a large portion of his annual income.
Planning ahead: Rules will get stricter in the next tax season
A Big Beautiful Bill Act from Congressional Republicans, which was signed by President Donald Trump last summer, removed those repayment limits. This means that in next year’s tax season, if people’s income exceeds their estimate, there will be no sliding-scale limit on how much they can owe in subsidies for 2026.
“It’s going to be absolutely devastating,” Alexander said.
There are at least two other things to keep in mind, both of which stem from enhanced COVID-era tax credits that expired at the end of last year because Congress did not extend them. One is that the amount people with household incomes have to pay for their premiums has increased this year by just over 2% for those at the bottom of the income scale, and by almost 10% for those on higher incomes, before the subsidy was introduced.
The second is that households earning more than four times the federal poverty level are no longer eligible for ACA subsidies.
The biggest financial hit may be felt by enrollees whose income increases during the year to more than four times the poverty level. In that case, they will have to return all the subsidies they received in 2026.
And that could be a lot.
For example, in 2025, the average monthly premium for ACA coverage was $619, but the average enrollee received enough subsidies to offset all but $74, according to Peterson-KFF Health System Tracker.
For some people there is another twist. Because the enhanced credit was not extended, people are paying on average double the amount for their premiums this year, so they may be looking to increase their income to cover the cost. A Recent survey by KFF found that 43% of people who will be enrolled in coverage this year plan to work more hours or get additional work to cover those costs.
“It makes sense, but it also could introduce the risk of being eligible for a lower subsidy amount than they thought, or it could even mean they would have to repay the full tax credit,” said Cynthia Cox, senior vice president and director of the program on the ACA at KFF, a health information nonprofit that includes KFF Health News.
People can update their estimated earnings on the marketplace website if there are changes during the year.
Pisgah staff are calling people they’ve worked with and saying, “Please, please, please, if your income changes, call us so we can adjust your income through the marketplace,” Alexander said.
Keep track of income during the year as accurately as possible. This is not easy, especially for workers who do not have regular paying jobs.
“If you’re meeting with a CPA to talk about taxes, negotiate to make sure you’re making enough money to cover your costs, but not so much that you lose eligibility for subsidies,” Cox said. “Contributing to a retirement plan or health savings account may reduce the portion of your income that counts toward subsidy eligibility.”
Others may choose to scale back their work hours or forgo a new client contract.
Jason Levitis, a senior fellow at the Urban Institute who tracks the ACA and tax policy issues, said, “If taking that extra change means putting you above the 400% line of the federal poverty level and it will cost you $10,000 in repayment, then maybe don’t make that change.”
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