Individuals & FamiliesMedicareMedicaidFor EmployersFor AgentsFor Providers
Individual & Family
Medications & PharmacyFind a Doctor
AboutContact us

Premium tax credits: How they lower your monthly premium

Many people qualify for premium tax credits and save on monthly health coverage costs.

Page last updated on: 9/04/26

Premium tax credits can significantly lower the cost of health insurance. If you qualify and enroll in a Marketplace plan, your monthly premium may be reduced right away. Many individuals and families are eligible, making coverage more affordable than expected.

Understanding how premium tax credits work can help you estimate costs more accurately and avoid overpaying for coverage. 

Premium tax credits and advance premium tax credits

You may hear the terms premium tax credit and advance premium tax credit used together. They’re closely related, but they’re not the same thing.

What is a premium tax credit?

A premium tax credit (PTC) helps eligible individuals and families reduce the monthly cost of Marketplace health insurance coverage.

What is an advance premium tax credit?

An advance premium tax credit (APTC) is the portion of a premium tax credit that is paid directly to your health insurance company each month to reduce what you pay for coverage.

In simple terms:

A premium tax credit is the savings you qualify for. Most people receive those savings as an advance premium tax credit, which lowers their monthly premium throughout the year instead of claiming the credit at tax time.

How PTCs work

When you apply for Marketplace coverage, you estimate your income for the year. If you qualify for a PTC, you can choose to:

  • Apply all of your tax credit in advance to lower your monthly premium
  • Apply part of it and claim the rest when you file your taxes
  • Claim the entire credit when you file your taxes instead of using it during the year.

With APTC, the credit is sent directly to your health plan, reducing what you pay each month instead of reimbursing you later.

What happens at tax time

Because APTC is based on an income estimate:

  • If your actual income is lower than expected, you may receive an additional credit when you file your taxes
  • If your income is higher than expected, you may have to repay part of the credit

Keeping your income information up to date on the Marketplace can help avoid surprises at tax time.

Who qualifies for a premium tax credit?

Premium tax credit eligibility is based on your household income and family size. In general, the amount of financial help you may receive depends on how your income compares to the federal poverty level.

  • Premium tax credits are available to people whose income is between 100% and 400% of the federal poverty level
  • The lower your income, the more financial help you may qualify for
  • Many people qualify, including those who earn too much for Medicaid or don't consider themselves low-income

Because eligibility varies by income and household situation, comparing plans with your estimated yearly income is the best way to see what you may qualify for.

How premium tax credits are applied

Most people choose to use their premium tax credit in advance to lower their monthly premium and start saving right away.

When you qualify:

  1. Your tax credit is sent directly to your health plan
  2. Your monthly premium is reduced before you pay your bill
  3. You see the savings each month instead of waiting until tax time.

You can choose to:

  • Apply all of your credit each month
  • Apply part of your credit each month and claim the rest when you file your taxes

Using the credit in advance helps make monthly coverage more affordable throughout the year.

What happens if your income changes

Advance premium tax credits are based on an estimate of your income for the year. If that estimate changes, your credit may change too.

Examples of income changes include:

  • A new job or raise
  • Fewer work hours
  • Self‑employment income changes
  • Gaining or losing a household member

Updating your income with the Marketplace as soon as it changes can help:

  • Adjust your monthly credit
  • Prevent owing money later
  • Make sure you’re getting the right level of help

Frequently asked questions

The Department of Health and Human Services (HHS) sets federal poverty guidelines each year. They determine eligibility for many programs, including premium tax credits (PTC) and cost-sharing reductions (CSRs) for Marketplace plans.

  • To qualify for a PTC, your household income generally must be between 100% and 400% of the Federal Poverty Level (FPL).
  • To qualify for CSRs, your household income generally must be at or below 250% of the FPL, and you must enroll in a Silver Marketplace plan.

Because PTC amounts are based on a sliding scale, it's worth seeing if you qualify for a subsidy.

Here are the 2026 federal poverty guidelines for coverage year 2027. Use your household's adjusted gross income.

Persons in family/household100% poverty guideline*250% poverty guideline400% poverty guideline
1$15,960$39,900$63,840
2$21,640$54,100$86,560
3$27,320$68,300$109,280
4$33,000$82,500$132,000
5$38,680$96,700$154,720
6$44,360$110,900$177,440

*For families/households with more than 6 persons, add $5,500 for each additional person.

Eligibility depends on your estimated income, household size, and Marketplace coverage options. Getting a quote and comparing plans is the best way to see if you qualify and how much savings you may receive.

A premium tax credit (PTC) helps lower the cost of your health insurance premium.

When you apply for Marketplace coverage, you'll provide information such as your estimated household income, family size, where you live and whether you have access to other health coverage. That information helps determine whether you qualify for a premium tax credit and how much you may receive.

Most people choose to receive their credit in advance. In that case, the credit is paid directly to your health plan and applied to your monthly premium, reducing what you pay each month.

Because the credit is based on estimated income, it may be adjusted when you file your taxes. If you earned less than expected, you may qualify for additional savings. If you earned more than expected, you may need to repay part of the credit.

Yes. If you're eligible, you can receive both a premium tax credit and cost-sharing reductions. When you shop for a MyPriority plan, we'll check for both types of assistance for you.

When you file your federal tax return, the amount of premium tax credit you received is compared to what you actually qualified for based on your final yearly income. This process is called reconciliation.

Not usually, but it depends on your final income.

When you file your taxes:

  • If your actual income is close to what you estimated, your premium tax credit will typically reconcile with little or no adjustment.
  • If you earned more than expected, you may need to repay some or all of the credit you received.
  • If you earned less than expected, you may qualify for an additional credit.

Keeping your income information up to date throughout the year can help you avoid unexpected tax-time adjustments.

Reporting changes helps make sure your premium tax credit stays accurate throughout the year. This can prevent overpayment, underpayment or having to repay credits later.

If your income or household size changes during the year, your premium tax credit may need to be adjusted. Reporting changes to the Marketplace as soon as they happen can help keep your monthly costs accurate and reduce surprises at tax time.

Yes. Premium tax credits are reviewed when you file your federal taxes. Keeping your income and household information up to date throughout the year can help avoid unexpected adjustments.

Pay less when you get care

Learn about savings that help lower out-of-pocket expenses when you receive care.

How cost-sharing reductions work

Eligibility and savings vary based on household size, income and other factors. Marketplace rules may change.

1 Priority Health was named to the America’s Best Customer Service in Financial Services list by USA TODAY for 2026, and to Newsweek’s America’s Best Customer Service list for 2025 and 2024.