Health Insurance Premium Tax Credit and Cost-Sharing Reductions

Certain individuals without access to subsidized health insurance coverage may be eligible for the premium tax credit (PTC), which is applied toward the cost of purchasing specific types of health plans offered by private health insurance companies. The PTC was established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended). The dollar amount of the PTC varies from individual to individual, based on a formula specified in statute. Individuals who are eligible for the PTC may be required to contribute some amount toward the purchase of private health insurance. To be eligible to receive the premium tax credit in 2026, individuals must have annual household income at or above 100% of the federal poverty level (FPL), but not more than 400% of FPL; not be eligible for certain types of health insurance coverage, with exceptions; file federal income tax returns; and enroll in a private health insurance plan through an individual exchange. Exchanges serve as marketplaces for the purchase of private health insurance. The PTC is refundable so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income tax liability. The credit also is advanceable so individuals may choose to receive advanced payments of the credit (or APTC) ahead of filing their taxes. APTCs are provided on a monthly basis to coincide with the payment of insurance premiums, automatically reducing consumer costs associated with purchasing insurance. The credit is financed through permanent appropriations. Individuals who receive premium tax credit payments also may be eligible for subsidies that reduce cost-sharing expenses. The ACA established two types of cost-sharing reductions (CSRs). One type of subsidy reduces annual cost-sharing limits; the other directly reduces cost-sharing requirements (e.g., lowers a deductible). Individuals who are eligible for CSRs may receive both types. The American Rescue Plan Act of 2021 (ARPA,) and the FY2022 budget reconciliation measure (P.L. 117-169) made temporary changes to the PTC that expanded eligibility to higher-income households and increased PTC amounts for all eligible households. Those changes expired on January 1, 2026, leaving the PTC operating under ACA-only rules with respect to capping income eligibility and calculation of PTC amounts. The FY2025 budget reconciliation measure (P.L. 119-21) made eligibility and other changes to the PTC with different effective dates. This report describes current law and applicable regulations and guidance, specifically with regard to how the PTC and CSR requirements apply in 2026.