Tax Facts

8851 / If a taxpayer is eligible for the premium assistance tax credit, what happens if the household income level or family size changes during the tax year?

Updated: October 20, 2026 at 03:24 PM
The amount of the allowable premium assistance tax credit varies based upon a taxpayer’s annual household income and family size. If either the household income level or family size change throughout the tax year, the taxpayer’s allowable credit will increase or decrease accordingly. This becomes important when a taxpayer has chosen to take the premium tax credit in advance (where the credit is paid directly to the insurance company to reduce premiums), rather than retroactively (where the credit is claimed on the taxpayer’s federal income tax return for the year).1


If the actual allowable credit is less than the advance credit claimed, the difference will be deducted from the taxpayer’s overpayment (tax refund) or added to the amount that the taxpayer owes to the IRS if no tax refund is forthcoming. If the actual allowable credit is more than the advance credit claimed, the reverse is true, so that the difference will be added to the taxpayer’s refund or subtracted from the balance due to the IRS.2

The IRS has released guidance that advises taxpayers to notify the health insurance exchanges if any changes in circumstances have occurred that will alter the amount of the allowable credit in order to reduce the significance of the difference between the advance credit and actual allowable credit.3 Changes in circumstances that can give rise to such a difference include the following:

  1. Increases or decreases in household income

  2. Marriage

  3. Divorce

  4. Birth or adoption of a child

  5. Gaining or losing eligibility for government or employer-sponsored health insurance4


See Q 8850 for a discussion of how household income is calculated for purposes of the premium assistance tax credit.





1.  See IRS Pub. 5121 (rev. 1/2016).

2.  Treas. Reg. § 1.36B-4(a).

3.  IRS Pub. 5120 (rev. 2/2018).

4.  See IRS Questions and Answers on the Premium Tax Credit, available at: https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit (last accessed September 28, 2024).


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