Treasury and IRS Propose New Premium Tax Credit Limits for Some Immigrants

The Treasury Department and the IRS published a proposed rule on Wednesday, October 14, to implement changes to the premium tax credit (PTC), the refundable credit that helps pay for health insurance purchased through the Health Insurance Marketplace, also known as Obamacare or HealthCare.gov. The rules implement provisions of the 2025 tax cut law, the Working Families Tax Cuts. More details are available in the IRS announcement.

Why it matters: The measure could affect about 15.6 million people enrolled in the Marketplace, including 13.5 million who could claim the credit. In families with immigrants, some members who are lawfully present could be excluded from the subsidy calculation starting in 2027. For those receiving monthly subsidies, new verification requirements apply, and beginning in 2026, there is no longer a cap on repaying excess subsidies.

What Changes for Premium Tax Credit and When

• 2026: immigrants who are lawfully present and have incomes below 100% of the federal poverty level but do not qualify for Medicaid because of their immigration status will no longer be eligible for the Premium Tax Credit. In addition, the cap on repaying excess advance subsidies is eliminated: if the payments received exceed the credit you qualify for when filing your 2026 taxes, you must repay the full difference. Plans purchased during a special enrollment period based solely on an expected income change also do not qualify for the credit.
• 2027: the credit is limited to citizens, nationals, and certain immigrants who are lawfully present. Family members of immigrants who are lawfully present but are not "eligible aliens," a category defined in section 36B(e)(2)(B) of the tax code, are excluded from the calculation, and their premiums do not receive Obamacare subsidies.
• 2028: a month counts toward the credit only if the Marketplace verifies residency and citizenship, national status, or lawful presence. For advance payments, household income, family size, lack of other coverage, and, when applicable, eligible alien status must also be verified.

What's Still Undefined

This is a proposal, not a final rule. Comments are accepted for 45 days after publication in the Federal Register, through regulations.gov under reference REG-101576-26. A public telephone hearing is scheduled for December 8, 2026, at 10 a.m. Eastern Time. The Department of Health and Human Services (HHS) is expected to issue parallel rules governing Marketplace procedures.

What You Can Do About Premium Tax Credit Limits

• Review your immigration status, your family's status, and your eligibility before the 2027 open enrollment period, which begins November 1 at HealthCare.gov.
• Report changes in your income: beginning in 2026, there is no longer a repayment cap, and you may owe the full difference.
• Keep documentation of your immigration status and income available for verification.