Form 1095-A Changes for 2026: Repayment Caps Are Gone

Are you covered through the Health Insurance Marketplace?

Then read this before you file.

If your income came in higher than what you told the Marketplace — a raise, a bonus, overtime, a side gig, a stock or crypto sale, an IRA or retirement distribution, a lump-sum Social Security payment, cancelled debt, a marriage, a move — the advance premium tax credit you received during the year may be more than you were actually entitled to. You will have to pay the difference back.

That has always been true. What is new for 2026 is that the safety net is gone. The repayment caps that used to limit that bill expired on December 31, 2025. For tax years after 2025 there is no cap. You repay the full excess, no matter what your income is.

For a household that received a substantial advance credit, that can be a five-figure balance due on a return that was expected to produce a refund.

This is not a hypothetical. It is the single most common surprise our office sees from Marketplace clients, and 2026 is the first year it arrives with no ceiling on it.

Executive Summary for the Taxpayer: The pre-2026 safety net is gone. The temporary premium tax credit repayment caps expired after 2025 and the 400% federal poverty line eligibility ceiling returned, so a Marketplace household whose income rose may have to repay the entire excess advance premium tax credit. Separately, the Marketplace changed how it reports premiums in Columns A and B for the 2025 return being filed now. The repayment is a tax liability rather than an automatic penalty.

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The Form Looks the Same; Two Rules Around It Changed

The 2026 Form 1095-A continues to report Marketplace coverage, household members covered, monthly premiums, the applicable second-lowest-cost Silver plan premium, and advance premium tax credit payments. The form continues to use Parts I, II, and III for that information; the significant change is what happens when those amounts are reconciled on Form 8962. IRS Health Insurance Marketplace Statements

Form 1095-A is issued by the Health Insurance Marketplace to people enrolled in qualifying Marketplace coverage. It reports the advance premium tax credit, or APTC, paid to the insurer on the taxpayer’s behalf. IRC §36B

The Marketplace generally must furnish Form 1095-A by January 31 following the coverage year. You do not attach Form 1095-A itself to your federal income tax return, but you use it to complete Form 8962, Premium Tax Credit. IRS Form 1095-A guidance

If any amount of APTC was paid on your behalf, you must file a federal income tax return with Form 8962, even if your income would otherwise be below the normal filing threshold. Failure to file and reconcile can also affect your ability to receive APTC in a later year. IRS FS-2025-10, Q28

The 2026 Change: Repayment Caps Are Gone

For tax years before 2026, other than 2020, a repayment cap could limit how much excess APTC a taxpayer had to repay when household income was below 400% of the federal poverty line. The cap depended on household income and filing status. IRS FS-2025-10, Q31

For tax years after 2025, there is no repayment cap. If the APTC paid during the year exceeds the actual premium tax credit allowed on Form 8962, the full difference is added to the taxpayer’s total tax liability. IRS FS-2025-10, Q31

That amount may:

• Reduce your federal income tax refund.
• Increase your balance due.
• Create an ordinary federal tax debt.
• Increase the amount subject to interest and collection activity if it remains unpaid. IRC §§6601, 6621

The repayment is not automatically a penalty. It is the required reconciliation of a refundable tax credit that was paid in advance based on an estimate. A separate penalty requires a separate statutory basis, such as negligence, substantial understatement, late filing, late payment, or fraud.

Illustrative comparison

Assume the following facts:

• A household received $12,000 of APTC during the year.
• The household’s final Form 8962 calculation allows only $7,000 of premium tax credit.
• The true excess APTC is therefore $5,000.

Under a pre-2026 example, a repayment cap might have limited the repayment to an illustrative $3,000, assuming the household met the applicable income and filing-status requirements. The remaining $2,000 would not have been repaid because of the cap.

For 2026 coverage, the full $5,000 excess is added to the taxpayer’s tax liability. The figures are illustrative; the actual result depends on household income, family size, filing status, coverage months, benchmark premiums, and other Form 8962 information. IRS FS-2025-10, Q24 and Q31

The 400% Federal Poverty Line Cliff Is Back

The temporary enhanced premium tax credit rules applied for tax years 2021 through 2025 and removed the general rule disqualifying households with income above 400% of the federal poverty line. That expansion ended after 2025. IRC §36B; IRS FS-2025-10, Q7

For 2026 coverage, premium tax credit eligibility generally requires household income to be:

• At least 100% of the federal poverty line.
• No more than 400% of the federal poverty line for the household’s family size. IRC §36B(c)(1)(A)

This creates a cliff rather than a smooth phaseout. A household just under 400% of the federal poverty line may qualify for a credit, while a household just over 400% may be ineligible for any federal premium tax credit and may have to repay all APTC received for the year. IRS FS-2025-10, Q7

For 2026 coverage, Form 8962 uses the federal poverty line figures applicable under the IRS instructions, including the 2025 federal poverty line figures specified for the 2026 calculation. The exact figure depends on family size and whether the taxpayer resides in the 48 contiguous states and District of Columbia, Alaska, or Hawaii. IRS FS-2025-10, Q7

Another number matters for households with employer coverage. For plan years beginning in 2026, employer-sponsored coverage is generally considered affordable when the applicable employee or family premium does not exceed 9.96% of household income, subject to the applicable rules and minimum-value requirements. Rev. Proc. 2025-25

Why Household Income Changes Create Surprises

The Marketplace calculates APTC using projected household income and family information. Form 8962 reconciles that estimate against the final household income and tax household reported on the federal return. IRC §36B; IRS FS-2025-10, Q3 and Q4

Common events that can create a mismatch include:

• A lump-sum Social Security or Social Security Disability Insurance payment.
• A large IRA or retirement-plan distribution.
• Capital gains from stock, bond, real estate, or cryptocurrency sales.
• Cancellation or forgiveness of debt.
• Marriage or divorce.
• Birth or adoption.
• A change in dependents.
• Gaining or losing employer-sponsored coverage.
• Becoming eligible for Medicare, Medicaid, CHIP, or another government program.
• Moving to another address or coverage area. IRS FS-2025-10, Q4

For Marketplace purposes, household income generally includes modified adjusted gross income for the taxpayer, spouse, and certain tax dependents. It can also include tax-exempt interest, excluded foreign income, and otherwise nontaxable Social Security benefits. IRS FS-2025-10, Q8

A taxpayer who receives a large year-end distribution may not think of that event as “health insurance income,” but it can increase household income for premium tax credit purposes. That is why a 1095-A issue can become a retirement, investment, or self-employment planning issue.

How This Actually Happens at Renewal Time

Every year, the Marketplace runs an annual eligibility redetermination for the coming year under 45 C.F.R. §155.335. It recalculates your advance premium tax credit for the next coverage year. 45 C.F.R. §155.335

Crucially, it does not ask you what you are earning now. It uses the most recent information already in the system and applies the annual redetermination rules described by CMS. CMS Guidance on Annual Redetermination and Re-enrollment

The Marketplace generally works down this data hierarchy:

• First, your projected income from your most recent application, adjusted for expected growth.
• If that is not available, your most recent tax return data from the IRS data match, adjusted for expected growth.
• If neither is available, your prior-year projected income, adjusted using federal poverty level growth rates. CMS Guidance on Annual Redetermination and Re-enrollment

In plain English, that means the Marketplace may still be using an old number. If you earned $40,000 when you last reported your income and now you are earning $60,000, the Marketplace may still be calculating your subsidy on something close to the old number.

It will not know about your raise unless you tell it. Quietly, with no letter and no warning, your advance credit keeps flowing at a level you are no longer entitled to.

For 2026, that timing problem gets expensive. Whatever excess accumulated during the year gets repaid in full at reconciliation, because there is no repayment cap after 2025. That is how a household ends up with a four- or five-figure balance due having done nothing wrong except failing to update an income figure. IRS FS-2025-10, Q31

Auto-renewal adds to the problem. If you take no action during open enrollment, you are generally automatically re-enrolled in your current plan or a comparable plan, at the recalculated advance credit amount, and many enrollees never review that number. HealthCare.gov: Renew, change, update, or cancel your plan

The fix is simple but easy to miss. Review your application during open enrollment and update your income, household size, address, and coverage every time something changes. If your income is uncertain, take less advance credit than you qualify for, because a smaller advance now cannot create a repayment later.

There is also a second consequence if you stop filing and reconciling. If you fail to file a return and reconcile APTC for two consecutive years, you can lose eligibility for advance credit payments entirely, which can mean paying full price for coverage until the issue is resolved. 45 C.F.R. §155.305(f); CMS Failure to File and Reconcile overview

CMS Marketplace Fraud Actions Add Another Risk

On August 31, 2026, CMS canceled approximately 315,000 unauthorized Federal Marketplace enrollments covering more than 760,000 individuals. CMS stated that it expected to recoup approximately $2.2 billion in advance premium tax credit payments connected to those enrollments. CMS, Federal Marketplace Anti-Fraud Actions

CMS also reported that it had:

• Sent termination notices to more than 200 non-compliant agents and brokers since January 2026.
• Issued 569 notices of intent to terminate Exchange Agreements.
• Announced a temporary moratorium on registering agents and brokers for 2027 when they lack an active 2026 Exchange Agreement.
• Required agents and brokers to re-identity-proof through Login.gov or ID.me.
• Required Social Security numbers or verifiable immigration document numbers on agent- or broker-assisted applications.
• Prohibited agents and brokers from being added to applications that consumers should complete themselves.
• Begun implementing electronic consumer authorization before an agent or broker can act on an application. CMS, Federal Marketplace Anti-Fraud Actions

The practical consequence is important: a taxpayer may receive a Form 1095-A for a plan the taxpayer never selected, discover that APTC was paid on an unauthorized enrollment, or find that an agent changed the household’s plan.

If that happens:

1. Log in to your Marketplace account and review the plan, covered individuals, coverage months, and APTC.
2. Compare the information with your insurance card, premium bills, and bank records.
3. Contact the Marketplace, not the IRS, to dispute or correct Form 1095-A information.
4. Preserve notices, emails, screenshots, call records, and evidence of unauthorized activity.
5. Consider changing account credentials and reporting identity misuse through the applicable Marketplace process.

The CMS action primarily concerns the federally facilitated Marketplace. New Jersey operates its own state-based Marketplace, Get Covered New Jersey, but New Jersey residents should still review their accounts and forms carefully. Get Covered New Jersey FAQs

New Jersey Residents: Get Covered New Jersey

New Jersey residents receive Form 1095-A from Get Covered New Jersey when they or a household member enrolls in qualifying Marketplace coverage. The form may be available through the secure online account and is generally mailed by January 31 following the coverage year. Get Covered New Jersey FAQs

The federal reconciliation rules apply to New Jersey filers in the same way they apply elsewhere:

• Use Form 1095-A to complete federal Form 8962.
• Reconcile federal APTC against the allowable federal premium tax credit.
• Repay excess APTC when required.
• Do not include New Jersey Health Plan Savings in the federal APTC amount on Form 8962. Get Covered New Jersey FAQs

If a New Jersey Form 1095-A is missing or incorrect, contact Get Covered New Jersey at 1-833-677-1010.

Corrected, Incorrect, or Voided Form 1095-A

If the “CORRECTED” box is checked, use the corrected form in its entirety when preparing the return. It replaces the earlier version for that policy. IRS Corrected, Incorrect, or Voided Form 1095-A

Review the corrected form for changes to:

• Coverage months.
• Covered individuals.
• Monthly enrollment premiums.
• Second-lowest-cost Silver plan premiums.
• Monthly APTC amounts. IRS Corrected, Incorrect, or Voided Form 1095-A

If you already filed, do not automatically assume that an amended return is required merely because a corrected form arrived. The IRS states that some corrections, particularly identifying-information corrections, may not affect the tax return. Other changes may affect Form 8962 and may justify Form 1040-X. IRS Corrected, Incorrect, or Voided Form 1095-A

A voided Form 1095-A is different. Do not use the voided form or the previously issued form to claim or reconcile a premium tax credit. If you filed using an erroneous form that was later voided, an amended return may be necessary. IRS Corrected, Incorrect, or Voided Form 1095-A

A Second 1095-A Change — and It Affects the Return You File Now

The final regulations under IRC §36B changed how Marketplaces report Form 1095-A for months where the premium was not fully paid. Internal Revenue Bulletin 2025-04

For Column A, enrollment premiums, the Exchange must now report the full enrollment premium for any month that qualifies as a coverage month under the three scenarios addressed by the regulations. For other months where the full premium was not paid, the Exchange continues to report $0. Internal Revenue Bulletin 2025-04

For Column B, second-lowest-cost Silver plan premium, the Exchange must not report $0 for months that qualify as coverage months under those scenarios. Instead, it reports the SLCSP premium that would have applied if the enrollment premium had been paid in full. Internal Revenue Bulletin 2025-04

Amounts reported in Column A must be reduced by any enrollment premium refunds or credits. Taxpayers must also reduce enrollment premiums used to compute the monthly premium tax credit by any portion of the premium that remained unpaid as of the unextended due date of the return. Internal Revenue Bulletin 2025-04

The timing matters. These final regulations apply to taxable years beginning on or after January 1, 2025, so this reporting change affects the 2025 return being filed now, not 2026 coverage. Internal Revenue Bulletin 2025-04

There is a practical complication. The IRS acknowledged that State Exchanges may need time to update their platforms and encouraged them to implement the changes as soon as possible. Because Form 1095-A is not an information return under IRC §6721, there is no penalty for an Exchange that files a form not yet reflecting these coverage-month rules. Practically, that means some Exchanges may report under the new convention while others still use the old one, so two households in similar situations in different states can receive forms that look different. Internal Revenue Bulletin 2025-04

That matters in New Jersey. New Jersey operates its own State Exchange, Get Covered New Jersey, so it falls into the category the IRS described. If a New Jersey Form 1095-A appears to understate enrollment premiums or shows $0 in Column B for a month you had coverage, that may reflect the prior reporting convention rather than an error in your account. Get Covered New Jersey FAQs; Internal Revenue Bulletin 2025-04

Do not assume a Form 1095-A is wrong just because it looks different from a prior year. Check the coverage months, premiums, and APTC against your own records, and contact the Marketplace if something does not match.

The Penalty Question: Repayment Is Not Automatically a Fine

The excess APTC repayment is a tax liability. It is not automatically an accuracy-related penalty, fraud penalty, failure-to-pay penalty, or estimated-tax penalty.

A separate penalty may apply if the facts satisfy the requirements of the relevant Internal Revenue Code section.

IRC §6662: 20% Accuracy-Related Penalty

The accuracy-related penalty is generally 20% of the portion of an underpayment attributable to negligence, disregard of rules or regulations, or a substantial understatement of income tax. IRC §6662; 26 C.F.R. §1.6662-2

For an individual, an understatement is generally substantial when it exceeds the greater of:

• $5,000.
• 10% of the tax required to be shown on the return. IRC §6662(d)

The $5,000 and 10% thresholds are not a penalty simply because your Form 8962 produces a large repayment. The IRS must connect the underpayment to negligence, disregard, or another applicable accuracy-related ground.

A good-faith income estimate that later became inaccurate is not automatically negligence. The relevant facts include what information the taxpayer had, whether the taxpayer updated the Marketplace when circumstances changed, whether records were kept, and whether the taxpayer made a reasonable effort to comply. 26 C.F.R. §1.6664-4

IRC §6663: 75% Civil Fraud Penalty

The civil fraud penalty is 75% of the portion of an underpayment attributable to fraud. Fraud requires more than an incorrect estimate or an unpaid balance; the IRS must establish fraudulent intent to evade tax. IRC §6663

The IRS bears the burden of proving fraud by clear and convincing evidence. IRC §7454(a); IRM 25.1

A taxpayer who underestimated income because of an unexpected stock sale, retirement distribution, bonus, or business increase is not automatically committing fraud. Fraud allegations generally involve intentional conduct such as knowingly falsifying information, concealing income, creating false records, or deliberately providing materially false information.

IRC §§6651 and 6654

IRC §6651 can impose additions to tax for failure to file or failure to pay. The failure-to-file addition can generally reach 5% of unpaid tax per month, subject to statutory limits, while the failure-to-pay addition is generally 0.5% per month, also subject to statutory limits. IRC §6651

IRC §6654 can impose an estimated-tax penalty when an individual does not make sufficient timely estimated payments. This issue can affect self-employed taxpayers, independent contractors, business owners, and households with large investment or retirement income. IRC §6654

The §6654 penalty is largely mechanical, although limited statutory exceptions and waivers may apply. A general statement that the taxpayer “did not know” about the repayment is usually not enough by itself. IRC §6654

Reasonable Cause, Good Faith, and IRS FAQ Reliance

The IRS may waive certain penalties when the taxpayer establishes reasonable cause and good faith. The taxpayer should explain the facts, timeline, actions taken, records maintained, and steps taken to correct the issue. IRC §6664(c)

FS-2025-10 contains an unusual but important reliance statement. The IRS says the FAQs were not published in the Internal Revenue Bulletin and will not be relied upon by the IRS to resolve a case, but a taxpayer who reasonably and in good faith relied on the FAQs will not be subject to a penalty that provides a reasonable-cause standard, including a negligence or other accuracy-related penalty, to the extent that reliance caused the underpayment. IRS FS-2025-10

That protection does not erase the underlying tax liability. It may, however, be relevant when a taxpayer can document reliance on the dated IRS guidance and show that the reliance caused the underpayment.

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A Developing Legal Issue: Was a Notice of Deficiency Required?

Walker v. Commissioner, T.C. Memo. 2026-4, addressed this directly. The taxpayers filed a joint return that omitted Form 8962 and Form 1095-A. The IRS issued Letter 12C asking for the missing forms, and the taxpayers responded with a Form 8962 showing household income above 400% of the federal poverty line and excess advance premium tax credit payments of $20,904. The IRS then adjusted the return and assessed the full $20,904 without first issuing a Statutory Notice of Deficiency, and later issued a notice of intent to levy.

The Tax Court held that the assessment was invalid. Because the original return did not account for the premium tax credit and the Form 8962 did not itself determine an amount of tax due, the additional liability was a deficiency under IRC §6211(a). That meant the IRS was required to issue a notice of deficiency before assessing, and its failure to do so made the assessment invalid — so the Appeals determination sustaining the levy was an abuse of discretion.

This remains a developing and fact-specific issue, not a blanket rule that every 2026 Form 8962 repayment is invalid. The analysis may depend on whether the taxpayer reported Form 8962 with the original return, whether the IRS later recomputed the credit, what notice was issued, and how the liability was assessed.

If you receive a Statutory Notice of Deficiency, do not ignore it. The notice generally creates a limited period to petition the U.S. Tax Court before paying the disputed amount, and the deadline must be treated as fixed unless the law provides otherwise. IRC §6213

If You Cannot Pay the Reconciliation Balance

For many households, 2026 may be the first time Marketplace coverage creates a balance due on the tax return. That reconciliation balance is an ordinary federal tax debt, not a punishment, and it can be resolved through the same collection procedures that apply to other unpaid federal income tax. IRM 5.15.1 If the balance becomes a notice, a lien, or a collection matter, that is a different fight than the return itself. See our IRS and state tax resolution services

Your options depend on your finances:

• File the return on time and pay what you can with the return.
• Request an installment agreement if you need time to pay.
• Request Currently Not Collectible status if paying would prevent you from covering basic living expenses. IRM 5.15.1
• Request penalty relief if you have a qualifying reason, because the IRS does not always offer that relief on its own. IRS Publication 1

Before you ask for relief, gather the records you will need for yourself and for any IRS request:

• Your filed return and every Form 1095-A.
• Original and corrected Marketplace statements.
• Your Form 8962 calculation.
• Any confirmation showing you reported an income change to the Marketplace.
• Wage, self-employment, retirement, and investment records.
• Bank statements.
• Current debt and payment records. IRM 5.15.1

If the IRS asks you to complete Form 433-A or Form 433-F, the income, expense, asset, and debt figures you report should match those records. IRM 5.15.1

You also have taxpayer rights during the process. You can authorize someone to represent you using Form 2848. A federally licensed Enrolled Agent can be authorized to handle the correspondence and negotiate the resolution on your behalf. Learn about Enrolled Agent representation You can challenge IRS actions and ask for collection alternatives if you cannot pay; the Taxpayer Advocate Service may help when an IRS problem causes significant hardship or when normal IRS processes have broken down. IRS Publication 1; Form 2848; Taxpayer Advocate Service

Certain victims of domestic abuse or spousal abandonment may qualify for relief from the married-filing-jointly requirement for premium tax credit purposes if the statutory conditions are met. IRC §36B(c)(1)(C); IRS FS-2025-10, Q9 and Q10

Marketplace hardship exemptions are a separate issue from federal premium tax credit repayment. A hardship exemption does not automatically eliminate an excess APTC liability. Get Covered New Jersey FAQs

What to Do Before 2026 Becomes a Balance Due

Take these steps before filing:

1. Download every Form 1095-A from the Marketplace account.
2. Check whether any form is marked corrected or voided.
3. Compare the form against insurance bills, plan documents, and bank records.
4. Recalculate projected 2026 household income, including retirement distributions, capital gains, business income, and taxable debt cancellation.
5. Update the Marketplace as soon as income, family size, address, or other coverage changes.
6. Consider taking less than the full APTC when income is uncertain.
7. Keep proof of every Marketplace update and income estimate.
8. If you expect to owe, consider a fourth-quarter estimated tax payment by January 15, 2027, if applicable. IRC §6654
9. If you cannot pay the full balance, file accurately and on time, pay what you can, and evaluate an IRS installment agreement or another collection option. IRS FS-2025-10, Q32

Brick Taxes can help review Forms 1095-A and 8962, analyze an unexpected repayment, address a corrected or unauthorized Marketplace form, and represent taxpayers before the IRS when a tax liability becomes a notice or collection matter. Clients seeking a professional testimonial can review the public Brick Taxes Google reviews.

Schedule a consultation at calendly.com/bricktaxes/resolve, or use our contact page to choose an appointment type.

Frequently Asked Questions

Did Form 1095-A change for 2026?

Not in the way many taxpayers have heard. The Form 1095-A reporting structure remains focused on Marketplace coverage, premiums, benchmark premiums, and APTC; the major change is the expiration of repayment caps and the return of the 400% federal poverty line limit for tax years after 2025. IRS FS-2025-10, Q7 and Q31

What happens if I underestimate my income on the Marketplace?

Your final household income is compared with the estimate used to calculate APTC. If your allowable premium tax credit is lower than the APTC received, the excess is added to your tax liability; for 2026 coverage, there is no repayment cap. IRS FS-2025-10, Q31

Are there repayment caps in 2026?

No. For tax years after 2025, taxpayers generally must repay the full amount by which APTC exceeds the allowable premium tax credit. IRS FS-2025-10, Q31

Why did my subsidy change even though I never reported a change?

The Marketplace recalculates your advance credit every year at annual redetermination using the most recent information it has — usually your last application or your most recent tax return data, adjusted for expected growth — rather than your current income. If your earnings rose and you did not update your application, the advance credit can stay at a level you are no longer entitled to, and you repay the difference at reconciliation. Review your application during open enrollment and update your income any time it changes. 45 C.F.R. §155.335

Is there a penalty for understating income for the premium tax credit?

The repayment itself is a tax liability, not automatically a penalty. A 20% accuracy-related penalty may apply if the underpayment is attributable to negligence or a substantial understatement, while a 75% civil fraud penalty requires proof of fraud by clear and convincing evidence. IRC §§6662, 6663

What if I get a 1095-A for coverage I never signed up for?

Review your Marketplace account, document the unauthorized enrollment, and contact the Marketplace that issued the form. The Marketplace, not the IRS, must investigate and correct Form 1095-A information. IRS Corrected, Incorrect, or Voided Form 1095-A

Do I have to file a return if I had Marketplace coverage?

If APTC was paid on your behalf, you must file a federal return with Form 8962 even if you otherwise would not have been required to file. IRS FS-2025-10, Q28

How do I fix an incorrect 1095-A?

Contact the Marketplace that issued the form and request a correction. If the Marketplace issues a corrected form, use it in its entirety when preparing the return; if the form is voided, do not use the voided form or the earlier form. IRS Corrected, Incorrect, or Voided Form 1095-A

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