What happens if you underestimate your income for Obamacare?

• No capon repaying excess advance premium tax credits, starting with 2026 coverage
• $62,600income at 400 percent of the poverty line for one person on 2026 coverage. Above it, the credit is zero
• 9.96%of income is the most a household between 300 and 400 percent of poverty pays for the benchmark silver plan in 2026

How the reconciliation works

When you apply on HealthCare.gov or a state exchange, you give an estimate of your household income for the coming year. The marketplace uses that estimate to figure your premium tax credit, and most people have it paid straight to the insurance company each month. That monthly payment is called the advance premium tax credit.

The credit is really based on your actual income for the year, not your estimate. So after the year ends, the marketplace sends you Form 1095-A showing what was paid on your behalf. You use it to fill out Form 8962 with your tax return, which recalculates the credit using your real income. The IRS puts it simply: you reconcile the credit with the advance payments on Form 8962.

If you were paid more than you qualified for, the difference is added to the tax you owe. If you were paid less, you get the difference back as part of your refund. Underestimating income is the version that costs you.

What changed starting with 2026 coverage

Through the 2025 tax year, most people under 400 percent of the poverty line had a limit on how much extra credit they had to pay back. That safety net is gone. The 2025 budget law removed the repayment limits for tax years beginning after December 31, 2025, and the IRS has updated its guidance to match.

A second change makes it sharper. The enhanced tax credits that let people above 400 percent of the poverty line qualify expired at the end of 2025. So for 2026 coverage the old cliff is back. For a single person on 2026 coverage, 400 percent of the 2025 poverty guideline of $15,650 is $62,600. Earn one dollar more and your credit for the whole year is zero, which means every dollar paid to your insurer on your behalf comes back to you as tax owed. For 2027 coverage the line moves to $63,840 for one person and $132,000 for a family of four.

Two examples with the math shown

These are my own illustrations, not quotes. They assume one person, age 40, in Hillsborough County, Florida, on 2026 coverage. The benchmark silver plan there is $648.49 a month at full price, from the CMS plan year 2026 data. I used the 2025 poverty guideline of $15,650 and the IRS applicable percentage table for 2026, and I kept everything else simple.

Scenario	Estimated	Actual	Credit paid	Credit earned	You repay
A. Raise midyear	$40,000	$50,000	$4,338	$2,802	$1,536
B. Big year	$40,000	$65,000	$4,338	$0	$4,338

Scenario A. At a $40,000 estimate, this person is at about 256 percent of the poverty line and is expected to pay about 8.61 percent of income toward the benchmark plan. That works out to a credit of about $4,338 for the year, or roughly $361 a month. Actual income comes in at $50,000, about 320 percent of the line, where the expected share is 9.96 percent. The credit they really earned is about $2,802. The $1,536 difference is added to their 2026 tax bill.

Scenario B. Same estimate, but a strong year pushes actual income to $65,000. That is above the $62,600 line, so the credit they qualified for is zero. They owe back the full $4,338. Under the old rules, households above 400 percent also had no cap, but far fewer people landed there because the enhanced credits did not have a cliff.

Notice how quickly this scales with age and family size. In the same county, the benchmark premium at age 60 is about $1,377 a month, a little more than double the age 40 price, so the credit, and the possible repayment, grows with them.

How to avoid a surprise tax bill

• Estimate the right number. The marketplace uses modified adjusted gross income, which HealthCare.gov describes as your adjusted gross income plus any untaxed foreign income, nontaxable Social Security benefits and tax exempt interest. It is not your take home pay. If you are self employed, it is based on net profit, and my self employed guide covers how to estimate it.
• Report changes as they happen. A raise, a new job, a bonus, or a spouse going back to work all change your credit. Log in, choose Report a Life Change, and update your income. HealthCare.gov warns that if you do not report a change you will have to pay back the difference when you file.
• Use less of the credit up front. You can choose to apply only part of your credit to your monthly premium and take the rest at tax time. If your income is lumpy, this is the cheapest insurance against a repayment.
• Watch the 400 percent line. Deductible contributions to a traditional IRA are an adjustment that lowers adjusted gross income, and so is an HSA contribution, which the IRS lets you deduct even if you do not itemize. Starting in 2026, bronze and catastrophic marketplace plans are HSA eligible. For someone near the cliff, a contribution can be the difference between some credit and none.
• Set money aside. If you know your income is likely to rise, park the extra credit in savings each month so the April bill is already covered.

What if you overestimate instead?

If your real income comes in lower than your estimate, Form 8962 works in your favor. You get the credit you were owed but did not receive, as a refund or a lower balance due. Overestimating costs you cash during the year, not at tax time. That is why, for people with unpredictable income, a slightly conservative estimate plus a midyear check is usually the safest plan.

What to do if you already know your estimate is wrong

Update it now. The marketplace will recalculate your credit for the remaining months of the year, which spreads the correction out and shrinks what you owe at tax time. If you are between jobs and your income just dropped, the change can work the other way and raise your credit, which is covered in my between jobs guide. You can also rerun your numbers in my subsidy calculator in a couple of minutes.

Bottom line

Underestimating your income used to cost a capped amount for most people. Starting with 2026 coverage it can cost the full credit. Estimate carefully, update the marketplace when life changes, and pay attention if you are anywhere near 400 percent of the poverty line. Sometimes the honest answer is that you should take less credit up front, even though that makes your monthly premium look worse. I'm Carson Hornish, an independent broker licensed in 31 states (NPN 21581721), and I check income estimates with every client. It costs you nothing, and here is why a broker is free.

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