Need to Know Tax › What's new on the return you're filing now
Health insurance
Marketplace health insurance: the first year without the enhanced credit
If you buy coverage through Connect for Health Colorado and get help with the premium, the rules for settling up got harder for 2026. A raise, a bonus or an IRA withdrawal can turn into a four- or five-figure bill, and the way to avoid it is to act before December 31, not in April.
The help you get with a marketplace premium is not a discount. It is a tax credit, the premium tax credit, paid in advance to your insurance company every month based on the income you told Connect for Health Colorado you expected to earn. When you file your return, the credit is recalculated on Form 8962 using what you actually earned. Earn less than you guessed and the difference comes back to you as a refund. Earn more and you pay some of it back. For 2026 coverage, three things changed about the “pay it back” part, and together they can make a modest change in income very expensive.
What changed for 2026
The enhanced credit expired. From 2021 through 2025 a temporary law made the credit larger at every income level and extended it to households above 400% of the federal poverty line. That ended December 31, 2025. For 2026 the credit is back to the original formula: smaller at most incomes, and nothing at all above 400% of poverty. Most people with marketplace coverage saw their monthly share of the premium go up in January even though nothing about their plan or their income had changed.
The cliff is back. Above 400% of the federal poverty line for your household size, you qualify for no credit. Not a smaller one: none. If your income ends the year one dollar over the line, every dollar of advance credit paid to your insurer during the year is repaid with your return.
The repayment cap is gone. Through 2025, if your actual income turned out higher than your estimate, the amount you had to repay was capped on a sliding scale, at most about $3,500 for a household under 400% of poverty. Starting with 2026 coverage there is no cap. You repay the full difference between what was advanced and what you actually qualified for.
Enrollment rules tightened. Coverage bought during a special enrollment period based on income alone no longer qualifies for the credit, and some lawfully present immigrants who qualified before no longer do. If either might describe you, ask before you count on the credit.
How the settling-up works
Form 8962 is two pages long and most of it is arithmetic. In plain English, this is what it does.
The marketplace sends you Form 1095-A. It arrives in late January or early February, by mail or in your Connect for Health account. Month by month, it shows the premium for your plan, the premium for the “benchmark” silver plan in your area, and the advance credit paid to your insurer. A return with marketplace coverage cannot be finished without it.
Your actual income sets the credit you were entitled to. The credit is the benchmark premium minus the share of it you are expected to pay yourself. That share is a percentage of your income, and the percentage rises with income: about 2% at the bottom of the range, 9.96% between 300% and 400% of poverty. The income that counts is household modified adjusted gross income, for everyone on the return, including a dependent child who has to file a return of their own.
Entitled-to minus advanced is the result. If you were entitled to more credit than was paid during the year, the difference is added to your refund. If you were entitled to less, the difference is added to your tax. For 2026 that second number has no ceiling.
| Household size | 100% of poverty | 400%: the cliff |
|---|---|---|
| 1 | $15,650 | $62,600 |
| 2 | $21,150 | $84,600 |
| 3 | $26,650 | $106,600 |
| 4 | $32,150 | $128,600 |
| 5 | $37,650 | $150,600 |
2025 federal poverty guidelines, which govern 2026 coverage, 48 contiguous states. Household size is the number of people on your tax return, not the number on the policy.
The cliff is a cliff. The credit does not taper as income approaches the line; it stops. For a couple over 60 in Colorado, where the benchmark premium can run $1,800 to $2,500 a month, the credit at 399% of poverty can be worth $15,000 or more a year. At 401% it is zero.
Worked example: one furnace, two outcomes
A couple in their late 50s, both on a Connect for Health plan, estimated $70,000 of income for 2026. On that estimate the marketplace advanced about $1,100 a month to their insurer, $13,200 for the year. In November one of them took a $20,000 IRA withdrawal to replace the furnace. Household income finished at $90,000. The cliff for two is $84,600.
| As it happened | Had they split the withdrawal | |
|---|---|---|
| IRA withdrawal in 2026 | $20,000 | $14,000 (the rest in January) |
| Household income for the credit | $90,000 | $84,000 |
| Percent of the poverty line | 426% | 397% |
| Credit they qualified for | $0 | about $11,800 |
| Credit advanced during the year | $13,200 | $13,200 |
| Repaid with the 2026 return | $13,200 | about $1,400 |
Under the line, the only thing that changes is their expected share of the premium: 9.96% of $84,000 instead of 9.96% of $70,000, a difference of about $1,400 (verify the 2026 applicable percentage). Over the line, the whole $13,200 comes back. Six thousand dollars of timing, $11,800 of tax. On a 2025 return the repayment in the first column would have been capped at about $3,500; for 2026 there is no cap.
Behind the scenes
The cliff is figured on modified AGI, which adds back tax-exempt interest, the untaxed part of Social Security, and foreign income. A retiree whose Social Security is mostly untaxed can be comfortably under the line on the face of the return and well over it for the credit. A careful preparer runs the Form 8962 numbers on every return that comes with a 1095-A before asking about anything else, because once the year is over there is only one lever left, and it is a small one: a traditional IRA contribution made by April 15, if there is earned income to support it.
Check where you stand before December. With the benchmark premium and advance credit from your 1095-A (or your Connect for Health account) it estimates the settling-up as well.
How to protect yourself
Report income changes as they happen. A raise, a new job, a spouse going back to work, a bonus, an IRA withdrawal, a capital gain, the sale of a rental. Update your income with Connect for Health Colorado the month it happens and the advance credit adjusts for the rest of the year. That does not change what you are entitled to, but it shrinks what was advanced, and so shrinks what you owe in April.
Know where you stand before December. If you are within $10,000 of the line, estimate the year in October or November with your pay stubs and statements in hand. A traditional IRA or HSA contribution lowers the income that counts; a Roth conversion or an IRA withdrawal raises it. A withdrawal that can be split across two calendar years, as in the example, often should be. December is when the choice can still be made.
An affordable employer plan ends the credit. If a job offers coverage that would cost you less than 9.96% of household income for self-only coverage, that plan is “affordable” in the law’s eyes, and you generally stop qualifying for the credit the month it is offered, whether or not you take it. Tell the marketplace when the offer arrives, not when the return is prepared.
File Form 8962 every year. If you received advance credit and do not reconcile it on a return, the marketplace can cut off advance credit for the following year. This happens most often to people who assumed they did not earn enough to need to file. Bring the 1095-A even if you expect to owe nothing.
Consider taking less in advance. You can tell the marketplace to advance only part of the credit, or none of it, and collect the rest as a refund when you file. It costs cash flow during the year and buys a smaller surprise in April. For a household whose income swings from year to year, it is often the right trade.
Married? File jointly. Married filing separately disqualifies you from the credit entirely, except in narrow cases involving domestic abuse or spousal abandonment. A couple that files separately for some other reason repays all of it.
The Colorado side
Colorado runs its own marketplace, Connect for Health Colorado, rather than using the federal HealthCare.gov site, so your 1095-A comes from Connect for Health and income changes are reported there. The state also runs its own premium help for some households who do not qualify for the federal credit (verify the 2026 program); that assistance is separate from Form 8962 and does not create a federal repayment. Colorado has no state-level equivalent of the premium tax credit on the DR 0104, so the reconciliation above is a federal matter only.
What to bring your preparer
- Form 1095-A from Connect for Health Colorado, every page, for every policy the household had during the year
- Any 1095-B or 1095-C from an employer or other coverage, showing the months it was offered
- Year-end statements for IRA withdrawals, Roth conversions, pensions and Social Security (Forms 1099-R and SSA-1099)
- Tax-exempt interest (it counts toward the cliff even though it is not taxed)
- The return of any dependent who had income and has to file
- If an adult child on your policy files their own return: both returns’ information, so the policy can be allocated between the two
- For a fall estimate: your most recent pay stubs and a list of any one-time income you expect before December 31
Questions people ask
I didn’t get a 1095-A. Can the return be filed without it?
Not if you had marketplace coverage. The IRS has a copy and will reject or hold a return that leaves out Form 8962. Download the 1095-A from your Connect for Health Colorado account or call them for a reprint.
My income went down. Do I get money back?
Usually, yes. If you qualified for more credit than was advanced, the difference is added to your refund. The same reconciliation that creates surprise bills creates surprise refunds; it only feels one-sided because people remember the bills.
My adult child is on my policy but files his own return. Whose income counts?
If he is not your dependent, the policy is shared between two tax households and the amounts on the 1095-A are allocated between the two returns. It is one of the more tangled parts of Form 8962, and the two returns have to agree with each other. Have both sets of information ready.
I’m over 65 and on Medicare. Does any of this apply to me?
Not for your own coverage; Medicare is not marketplace insurance. It applies if a younger spouse is on a Connect for Health plan, because the household’s income, including your Social Security and pension, sets that spouse’s credit.
What if I can’t pay the repayment?
It is part of your tax bill, so the normal options apply: an installment agreement requested with the return, or a short extension to pay. Interest runs until it is paid. Filing on time, even without full payment, keeps the penalties small and keeps next year’s advance credit intact.
Is Congress going to bring the enhanced credit back?
As of October 2026 it has not. Bills have been introduced. If that changes, it will be noted on the updates page, and the arithmetic in this article will be redone.
If you are anywhere near the line, this is a fall conversation
Whoever prepares your return can estimate the year from a few pay stubs and statements in October or November, and that is the only time the answer can still be changed. Bring the list above.