Premium tax credit
Updated for plan year 2026
In plain terms
The premium tax credit is a subsidy that lowers what you pay each month for a marketplace plan, based on your household income and the cost of a benchmark plan in your area. You can take it in advance, applied directly to your premium, or claim it on your tax return. The credit is the gap between a set percentage of your income and the benchmark premium, so a lower income generally means a larger credit. For 2026, the credit phases out above 400 percent of the federal poverty level.
A plain example
Your benchmark silver plan costs $600 a month, and based on your income your expected share is $250. The premium tax credit covers the $350 difference. You can apply that $350 to any metal tier: put it toward a $500 bronze plan and you'd pay $150, or toward a richer gold plan and pay the larger remainder.
Why it matters
For most marketplace shoppers, the premium tax credit is the difference between coverage that fits the budget and coverage that doesn't. Because it's tied to a yearly income estimate, getting that estimate right matters: too low and you repay at tax time, too high and you overpay all year.
A common point of confusion
The credit is calculated against the benchmark plan, not the plan you pick. You can apply it to any tier, but choosing a more expensive plan than the benchmark doesn't grow the credit, you just pay the difference. And it's only available for plans bought through the marketplace.