Three things that can jeopardize your premium tax credits

Created with the Affordable Care Act, expanded in 2021, and again through 2025, premium tax credits, or PTCs, have ensured health insurance can remain affordable for all Americans on the Marketplace. They save families, on average, $800 a year. As of 2024, 92% of Marketplace enrollees qualified for PTCs—more than ever before. And that’s a good thing. There has never been fewer uninsured people in America.

For some people, if those premium tax credits were to go away, health insurance, and therefore healthcare, would no longer be affordable. Enrollment would drop in 2026 from an estimated 22.8 million in 2025 to an 18.9 million if these subsidies aren’t renewed. But let’s live in the present –some common mistakes could leave you without credits you might otherwise qualify for.

More money, more problems

The first and most common reason someone might lose their PTCs is getting a raise in household income, including unemployment benefits.

PTCs are paid out on a sliding scale, with the amount of credit a household receives rising as the household’s income lowers. The Marketplace will use your household’s modified adjusted gross income (MAGI) to determine premium tax credit status for that year. Once you are approved for credits, the goal is to keep your household spending 8.5% or less on health insurance each year.

So as you might imagine, a few factors will come into play here to meet that window. The first one that probably comes to mind is income. If your household makes 100% or less than the poverty level for that year, then you’ll qualify for Medicaid, not PTCs. But, if you make somewhere north of that, and will spend more than 8.5% of your income on health insurance, then you will qualify for subsidies.

Which brings up the next factor, health insurance premiums. Every household will have different plans, different costs, and different household sizes. So therefore, your household’s mileage will vary depending on what your premium winds up being in comparison to your income.

For context, the second cheapest silver plan available in that household’s area is the one used to determine subsidy amounts in this equation. Your household, of course, can choose to take a different plan, but the premium difference is paid by the household.

An income change could make your premium more affordable. If, with your tax credits, your cost for premiums dips below 8.5%, you’d have to pay back those credits. And income doesn’t always mean paychecks, either. Things like lump sum Social Security or disability insurance payments, retirement account payments, and debt forgiveness could also put your PTCs at risk.

It’s important to keep all documentation surrounding income, payments, living situations, and unemployment benefits to make sure PTCs don’t have to find their way back to the government come tax season.

Improper tax filing

Another way a household might find themselves without PTCs, even if they qualified for them, is if they filed their taxes improperly. Of course, like we said above, you must file your income properly for income tax purposes, but there is more to it for those accepting PTCs.

Families receiving tax credits should fill out a Premium Tax Credit Form, or Form 8962 and attach it to the household’s return. To fill out this form properly, you will need Form 1095-A, a Health Insurance Marketplace Statement, which will get mailed to the household.

Proper completion of this form will prove one of three things:

It can prove you fell within the correct income threshold and prevent those PTCs from getting collected back from you. It might demonstrate that even though you didn’t get PTCs this year, you qualified for them. In that case, you could humbly request they get lumped into your tax return.

Or, and this is where your PTCs are in danger, your income changed and your premiums are no longer 8.5% of your income. Maybe you got some credit card debt erased, or you took a large retirement payout. When this happens, your household is required to pay that money back by means of higher taxes or a smaller tax refund.

But what if you just…didn’t do any of this? They can’t take the money back if your household doesn’t prove they had it in the first place, right? Wrong. If you don’t file at all, then you will get a sternly worded letter reminding you that PTCs aren’t guaranteed, and to fill out tax information for your household ASAP. If you still do nothing, your tax credits may be rescinded for the following year until you provide proper paperwork.

Losing your PTCs may also happen if you file anything regarding them improperly. If this happens, or if you fail to submit at all, you will receive a rejection letter. But thankfully, you may have a shot at redoing it. The IRS has instructions on its website detailing how to receive missing forms, fix errors, and resubmit.

Married filing separate

This does not apply to everyone who receives PTCs, but is worth mentioning. If you are married and filing your tax returns separately, you cannot receive PTCs. The only exception to this rule is if you are a survivor of domestic abuse and spousal abandonment according to the criteria in the 8962 Form mentioned earlier. In essence, the household must be living separately for the last six months of that tax year while keeping any dependent children and providing more than half of the cost of the household in order to file separately and keep PTCs intact.

What about the future of PTCs?

Like we said earlier, there are no guarantees that expanded premium tax credits will be available beyond 2025. The American Rescue Plan tweaked them into what they are today, but the Inflation Reduction Act only extended them so far. Luckily, a few Senators have proposed a bill making these tax credits permanent if passed. Which, in that case, save this article to remind yourself each year how to keep your lower health insurance costs intact.