The credit is built from a plan you may not buy
The premium tax credit is not a discount on the plan you pick. It is calculated from the second-lowest-cost Silver plan in your area, called the benchmark, and from what the law says a household at your income should be expected to contribute.
The difference between the benchmark premium and your expected contribution is your credit. You can then apply that same credit to any metal level you like, which is why moving from Silver to Bronze often reduces what you pay without changing the credit.
Income measured against the poverty guideline
Eligibility is expressed as a percentage of the federal poverty level for your household size, using the HHS poverty guidelines. Household means the people on your federal tax return.
The expected contribution is then set by the applicable percentage table that the IRS publishes each year. For 2027 the top of that table, the share of income a household at the upper end is expected to pay toward the benchmark, is 10.22%.
Above 400% of poverty, the credit stops entirely
The enhanced premium tax credits that applied in recent years expired on 31 December 2025. With the original rules back, there is a hard limit at 400% of the federal poverty level.
It is a cliff rather than a slope. A household one dollar above the threshold does not get a reduced credit; it gets no credit at all. For a family paying a large premium, a small amount of extra income late in the year can therefore be very expensive, which is the single strongest argument for estimating income carefully.
The estimate is settled on your tax return
The credit is advanced monthly to your insurer based on your estimate. At tax time it is reconciled against what you actually earned, on IRS form 8962.
Estimate low and you receive more during the year and repay the difference. Estimate high and you receive less and get the balance back. Reporting income changes to the Marketplace during the year is what keeps the gap small.
Frequently asked questions
How is the ACA subsidy calculated?
From the second-lowest-cost Silver plan in your area and the share of income the law expects your household to contribute. The difference is your credit, and you can apply it to any metal level you choose.
What is the 400% subsidy cliff?
Under the original ACA rules, which returned when the enhanced credits expired at the end of 2025, households above 400% of the federal poverty level receive no premium tax credit at all. It is a cliff, not a gradual phase out.
What happens if I estimate my income wrong?
The credit is reconciled on your tax return using form 8962. If you were advanced more than you qualified for you repay the difference; if less, you receive the balance. Reporting changes during the year keeps the adjustment small.
Do I have to buy a Silver plan to get the credit?
No. The benchmark used to calculate the credit is a Silver plan, but you can apply the credit to Bronze, Gold or Platinum. Only cost sharing reductions, which are separate, require a Silver plan.
Sources
- IRS Rev. Proc. 2026-26: section 36B applicable percentage table for 2027 · published 2026-07-27
- HHS ASPE: 2026 Poverty Guidelines · published 2026-01-15
- HealthCare.gov: Premium tax credit
- IRS: Premium Tax Credit form 8962
This guide explains officially published rules and figures. It is not an insurance quote and not an eligibility determination. Only HealthCare.gov, Medicare.gov, Social Security or the carrier can determine your eligibility and your actual price.
Want this checked against your situation?
A guide explains the rules. Vivian checks what applies to you — your county, your doctors, your medications — in English or Spanish, at no cost to you.