Marketplace Enrollees Could Face Surprise Tax Increases Next Year Thanks to the Republican Megabill

Due to a provision in last year’s Republican megabill, some people who buy marketplace health coverage for 2026 could face much larger tax bills next year. Those higher taxes will come on top of the higher premiums that nearly all marketplace enrollees are already paying because of congressional Republicans’ failure to extend premium tax credit enhancements, which expired in December.

Most marketplace enrollees get a tax credit in advance that reduces the amount they pay for their premiums. The amount of this advance premium tax credit (APTC) is based on households’ estimated income for that year (as well as household size), with lower-income households receiving more assistance. When enrollees file their taxes, they must reconcile the amount of the credit they received with the amount for which they qualified, based on their actual income.

If their earlier income estimate turns out to be too low, people must repay the excess credit received — but since the APTC first became available in 2014, federal law has capped people’s repayment amounts. (See Table 1.)

The caps were designed to protect people from large, unexpected tax bills if they experienced life changes during the year that are often impossible to predict, like receiving a lump-sum Social Security payment or inheritance or getting a new job.

People were still protected when they filed their 2025 taxes. But that’s ending this year, because the Republican megabill eliminates the APTC repayment caps beginning in tax year 2026. When marketplace enrollees file their 2026 taxes next spring, those with mid-year changes to their household size or financial situation could owe back thousands of dollars more than they would if the caps were still in place.  

Older adults could suffer the most because they are eligible for larger APTC amounts and so could face larger repayments if their income ends up higher than anticipated. Eliminating the repayment caps also harms people with fluctuating income, like freelancers, gig workers, and small business owners, who make up a large share of marketplace enrollees.

In some cases, marketplace enrollees can take steps to protect themselves from tax increases. People who experience a change in their projected annual income, household size, or offer of affordable employer-sponsored insurance should promptly update their information on HealthCare.gov or with their state-based marketplace, which will adjust the amount of their credit. But some people will face large repayment burdens even if they make reasonable predictions about their income and promptly report any changes. 

People can also protect themselves by taking less of the credit in advance than they are eligible for, based on their estimated income. But this means they will have to pay more out of pocket for their premiums. This option will likely be prohibitively expensive for many, especially because the expiration of the PTC enhancements caused 2026 premiums to spike, already leading more than a million people to drop their coverage.

Marketplace enrollees with low or moderate incomes thus face a double whammy in 2026. Their premiums have already risen considerably, and they could owe back a larger share of their income at tax time than in previous years. 

Enrollees whose estimated household income is below 400 percent of the federal poverty level ($62,600 for an individual or $128,600 for a family of four) but whose actual income turns out to exceed that “cliff” could face an even bigger jump in costs. With the PTC enhancements in place, they only needed to repay any excess APTC they received. Now that the enhancements have expired, this group is no longer eligible for APTC, so if their income rises unexpectedly above 400 percent of the poverty level, they will have to repay the entire APTC amount they received, which can be thousands of dollars. Among people who selected a plan during 2026 open enrollment and received APTCs, the average amount was $7,800 annually.

Some people exposed to large, unexpected tax increases will decide that marketplace coverage isn’t worth the potential surprise at tax time. People with lower health risks would be most likely to drop or forgo coverage, resulting in a risk pool that is sicker and thus costs more to cover. As a result, eliminating the APTC repayment caps is expected not only to reduce marketplace enrollment over time but also to raise premium costs for those who remain enrolled.

Table 2 lays out several scenarios. In some cases, people may need to repay thousands of dollars more at tax time because of this megabill provision.