Definition
A refundable federal tax credit that lowers the monthly cost of health insurance bought through the Health Insurance Marketplace.
What it means
The premium tax credit helps eligible people pay for marketplace health insurance. You can take it in advance each month to reduce premiums or claim it when you file. The amount is based on the cost of the second-lowest-cost silver plan in your area and an expected contribution that depends on household income compared with the federal poverty level. The temporary enhanced credits that covered people with incomes above 400% of the poverty level expired after 2025, so for 2026 the credit is generally available only to households with income from 100% to 400% of the poverty line who meet other rules, such as lawful presence and not being eligible for affordable employer coverage or Medicaid. Advance payments are reconciled on Form 8962, and you may have to repay some if income was higher than estimated.
Example
If the benchmark silver plan costs $600 a month and your expected contribution is $250 a month, the credit is $350 a month, or $4,200 for the year.
Illustrative numbers only. Your situation will differ.