Two different subsidies exist on the health insurance marketplace. They have different eligibility rules, they reduce different costs, and only one of them is restricted to a single metal tier.
Understanding which is which matters, because choosing the wrong plan can forfeit one of them entirely.
The two subsidies
The premium tax credit reduces what you pay each month for coverage. It can be applied to a plan at any metal level except catastrophic.
Cost-sharing reductions lower your deductible, coinsurance and out-of-pocket maximum. They are available only on silver plans, and only to enrollees within a narrower income band.
An eligible enrollee who takes the premium tax credit but chooses bronze to get the lowest monthly cost gives up the cost-sharing reductions completely. That is one of the more consequential decisions on the enrollment screen, and it is easy to make without noticing.
What changed for 2026
This is the most important context for anyone shopping right now.
The enhanced premium tax credits, originally created in 2021 and extended through the 2025 plan year, expired as of January 1, 2026. Two things follow from that.
The 400 percent cliff is back. Under the current rules, premium tax credit eligibility generally requires household income between 100 and 400 percent of the federal poverty level. During the enhanced period, the upper cap had been removed and premium contributions above 400 percent were limited to a percentage of income. That limit no longer applies.
The result is a genuine cliff rather than a slope. A household just over the 400 percent line receives no premium tax credit at all, while a household just under it may receive a substantial one. The effect is most pronounced for older enrollees, whose premiums are higher to begin with.
The repayment cap is gone. For tax years after 2025, there is no cap on how much excess advance premium tax credit must be repaid. If your actual income for the year lands above the eligibility threshold, you may have to repay the full amount of advance credit you received.
Some states have created their own assistance programs to offset part of this change. What is available varies enormously by state, from full backfills in a few states to nothing at all in others. Your state exchange is the authority on what exists where you live.
How the premium tax credit is calculated
The mechanism is worth understanding even without specific numbers.
- The marketplace determines your household income as a percentage of the federal poverty level for your family size, based on your estimate for the coverage year.
- That percentage maps to an expected contribution, a share of income you are expected to put toward premiums.
- The credit is the difference between that expected contribution and the premium of the benchmark plan, which is the second-lowest-cost silver plan available to you.
- You may apply the credit to any plan you choose, at any metal level except catastrophic. If you pick a plan cheaper than the benchmark, you pay less. If you pick a more expensive one, you pay the difference.
Because the benchmark is a local plan, the same household income can produce different credit amounts in different counties. The credit follows the local market, not a national figure.
Advance payments and the tax-time reconciliation
Most people take the credit in advance, paid directly to the insurer each month, which lowers the bill they see. That advance is an estimate, and estimates get trued up.
At tax time, the IRS compares the advance credit you received against the credit your actual income entitled you to.
- Income lower than estimated: you may receive an additional credit on your return.
- Income higher than estimated: you repay the excess. As noted above, for tax years after 2025 there is no cap on that repayment.
Two habits reduce the risk of an unpleasant surprise:
- Report income and household changes to the marketplace during the year, not at the end of it. A raise, a new job, a marriage, a birth, or a household member gaining other coverage all change the calculation. Reporting promptly adjusts the advance payment going forward instead of accumulating an overpayment.
- If your income is near an eligibility threshold, be conservative. The consequence of underestimating is a repayment; the consequence of overestimating is a refund.
You cannot claim the premium tax credit without filing a federal tax return for the year, and married filers generally must file jointly to be eligible.
Cost-sharing reductions in more detail
Cost-sharing reductions apply to silver plan variants and are available to enrollees with household income generally between 100 and 250 percent of the federal poverty level. HHS sets reduced maximum annual limitations on cost sharing for these variants each year, with the deepest reduction at the lowest income band and a smaller one in the band above it.
If you qualify, the silver plan you buy has a lower deductible, lower coinsurance and a lower out-of-pocket maximum than the same silver plan sold to someone who does not qualify. The plan name and network are the same; the cost sharing is not.
Members of federally recognized tribes and Alaska Native Claims Settlement Act shareholders have separate and more generous cost-sharing rules, including zero cost-sharing variants at certain income levels.
Who is not eligible
Several situations disqualify a household from premium tax credits regardless of income:
- Access to affordable, minimum-value job-based coverage. If an employer offers coverage that meets the federal affordability and minimum value tests, household members generally cannot claim the credit even if they decline the employer plan. The affordability test is defined by federal rules and adjusts annually.
- Eligibility for other qualifying coverage, such as Medicare, Medicaid or CHIP.
- Household income below the Medicaid threshold in states that have not expanded Medicaid, which creates a coverage gap in those states.
- Filing status that does not meet the requirements, in most cases married filing separately.
These rules are technical and the exceptions are real. A licensed agent, a tax professional, or your state exchange can apply them to your specific situation.
Where to get an answer for your household
The variables that decide your eligibility are your household income for the coverage year, your family size, your county, your access to other coverage and your filing status. None of those can be answered generically.
HealthCare.gov or your state exchange will run the calculation from your application. For the tax side, the IRS publishes guidance on the premium tax credit, and a tax professional can address your specific filing. For plan selection, health plan metal tiers explained covers why the silver decision matters, and open enrollment and special enrollment periods covers when you can act.
To get connected with licensed carriers and agents offering health plans in your area, you can request health insurance quotes.