Premium Tax Credit
The Premium Tax Credit (PTC) is a core component of the Affordable Care Act (ACA). Individuals who obtain their health insurance from a state or federal exchange or marketplace may be eligible for premium assistance in the form of the Premium Tax Credit.
When taxpayers enroll in marketplace plans, they provide income information that is used to calculate the amount of premium assistance they qualify for, and these amounts are paid directly to the insurance provider as Advance Premium Tax Credit (APTC) and reported to the individual on Form 1095-A. When the individual prepares their federal income tax return, they reconcile the amount of PTC they are eligible for with the amount of APTC that they received. If they received too much advance premium assistance, the difference must be paid back. If they did not receive enough, the difference will be returned to them as PTC.
Any taxpayer who receives advance premium tax credit payments (APTC) for Marketplace coverage must file a federal income tax return with Form 8962, using the information from Form 1095‑A, even if they otherwise would not have a filing requirement.
The One Big Beautiful Bill (OB3) Act brought some of the most substantial changes to PTC since the ACA was passed, many of which go into effect for tax years beginning after 2025, and preparers need to be ready.
Changes to Eligibility
Under prior rules, many ‘lawfully present’ aliens could qualify for the PTC if they otherwise met the income and coverage rules. For tax years beginning after December 31, 2026, the law adds an ‘eligible alien’ standard: certain lawfully present aliens must meet a narrower ‘eligible alien’ definition to qualify for the PTC; those who do not meet this standard will be treated as ineligible for the credit.
Individuals who are lawfully present will be considered “eligible aliens” if they are and are reasonably expected to be for the entire period of enrollment for which the PTC is claimed:
- an alien who is lawfully admitted for permanent residence under the Immigration and Nationality Act;
- an alien who has been granted the status of Cuban and Haitian entrant, as defined in section 501(e) of the Refugee Education Assistance Act of 1980; or
- an individual who lawfully resides in the U.S. in accordance with a Compact of Free Association referred to in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
Under previous law, lawfully present “aliens” who were making less than 100% of the federal poverty line (FPL) would not be eligible for Medicaid due to their immigration status. In these cases, they were treated as having income at 100% of the FPL which allowed them to qualify for PTC. OB3 eliminates this special rule, so these individuals will no longer be eligible for PTC or Medicaid.
Changes to Enrollment
OB3 made some changes to the Special Enrollment Periods (SEP) that allow individuals to enroll in qualifying plans outside of the open enrollment periods at the start of the year. These SEPs are related to changes in life events like getting married, having a baby, or losing your coverage. Life events like this will still allow a taxpayer to qualify for PTC during a SEP, but if a special enrollment is based on being under a certain income level, PTC would be unavailable for that coverage.
Changes to Repayments
Taxpayers who underestimate their income when they enroll in marketplace plans may get more APTC than they are eligible for and will need to repay excess amounts at tax time. Previously, there was a limit on the amount that taxpayers with income below 400% of the FPL would be required to pay back.
Beginning for tax years after December 31, 2025, these limitations are gone, so taxpayers will have to pay back all of the excess premium assistance regardless of their income.
It is vital that taxpayers do their best to provide accurate information when signing up for marketplace insurance to avoid large repayments at the end of the year.
Education Credits
Healthcare assistance credits aren’t the only tax benefit that saw major changes come out of the OB3 Act. For tax years beginning after 2025, taxpayers claiming the American opportunity or lifetime learning credit must include a valid Social Security number for themselves on the return, and if the credit is claimed for a student other than the taxpayer or spouse, the student’s name and Social Security number as well.
This change brings education credits in line with the Child Tax Credit, which also requires SSN for both taxpayer and child.
Child and Dependent Credits
For tax year 2025, The Child Tax Credit got a boost from $2,000 to $2,200 and the amount will be indexed for inflation after 2025.
For tax years beginning after 2025 the Child and Dependent Care credit is also more generous: the maximum credit rate is 50% of up to $3,000 of qualifying expenses for one qualifying individual ($6,000 for two or more), then phases down based on AGI in two steps, but never below 20% of eligible expenses for higher‑income taxpayers.
Credit Where Credit’s Due
With all of these changes, it is likely that many taxpayers will lose benefits that they have been accustomed to receiving. Proactive planning can minimize the impact when it comes time to file returns next filing season.
If you’re looking to learn more about these credits and ways to maximize them, check out our 2026 Tax Toolbox.