Preliminary Work and Taxpayer Data · Preliminary work to prepare tax returns
ACA requirements
tax year · reviewed 2026-08-19 · I. Ohu
The rule
Three things remain of the Affordable Care Act on an individual return, and only one of them now costs anyone money.
The individual mandate penalty is zero. An applicable individual is still required to maintain minimum essential coverage (IRC § 5000A(a)), and the requirement was never repealed. What was removed is the consequence: the applicable dollar amount under § 5000A(c)(3)(A) is $0 — the applicable dollar amount under IRC § 5000A(c)(3)(A), with the percentage-of-income alternative at zero percent for taxable years beginning after 2015TY2026. Both limbs of the penalty computation now produce nothing — the flat dollar amount is zero and the percentage-of-income alternative has been zero percent for taxable years beginning after 2015. A client who had no coverage owes nothing federally, though some states impose their own requirement.
The information forms identify the source of coverage, and the distinction between them is what gets tested:
- Form 1095-A — issued by the Marketplace to individuals enrolled in coverage through it. This is the one that matters most to the preparer, because the premium tax credit cannot be computed without it.
- Form 1095-B — issued by insurers and other providers of minimum essential coverage obtained outside the Marketplace.
- Form 1095-C — issued by an applicable large employer, meaning an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar yearTY2026.
The premium tax credit is where the 2026 return diverges from the last five. An applicable taxpayer under § 36B(c)(1)(A) is one with household income equal to or exceeding 100 percent but not exceeding 400 percent of the poverty line for the family size involvedTY2026. Married taxpayers must file a joint return (§ 36B(c)(1)(C)), and no credit is allowed to an individual who is another taxpayer’s dependent (§ 36B(c)(1)(D)).
Current figures
| Item | 2026 |
|---|---|
| Individual shared responsibility payment | $0 — the applicable dollar amount under IRC § 5000A(c)(3)(A), with the percentage-of-income alternative at zero percent for taxable years beginning after 2015TY2026 |
| Premium tax credit — income range | household income equal to or exceeding 100 percent but not exceeding 400 percent of the poverty line for the family size involvedTY2026 |
| The 400 percent ceiling | the suspension of the 400 percent ceiling applied only to taxable years beginning after 31 December 2020 and before 1 January 2026, so the ceiling operates again for 2026TY2026 |
| Temporary premium percentages | the temporary premium percentages likewise applied only to taxable years beginning after 31 December 2020 and before 1 January 2026TY2026 |
| Excess advance payments | repayable in full — the limitation in IRC § 36B(f)(2)(B) was removed for taxable years beginning after 31 December 2025TY2026 |
| Applicable large employer | an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar yearTY2026 |
How it works in practice
Get the Form 1095-A before computing anything. The credit is reconciled on the return against advance payments made to the insurer during the year, and the reconciliation runs off the monthly figures on the 1095-A — enrolment premium, the premium for the applicable second lowest cost silver plan, and the advance payment. A return prepared from the client’s recollection of what they paid will be wrong, and the mismatch surfaces as a notice.
Forms 1095-B and 1095-C are informational only. Nothing on them is entered on the return and neither is needed to file. They tell the preparer that the client had coverage from a non-Marketplace source, which matters chiefly because it means the client is not eligible for the premium tax credit for the months that employer coverage was affordable and adequate.
Advance payments and the credit are reconciled, in both directions. Where the advance payments exceeded the credit the taxpayer actually earned — usually because income turned out higher than projected — the excess is added back as additional tax. Where the credit exceeds the advance payments, the difference is refundable. Clients rarely anticipate the first case, and it arrives as a reduced refund on a return they expected to be routine.
Ask about mid-year changes, because they move the credit. Marriage, divorce, a birth, a move to a different rating area, a new job with employer coverage, and a change in projected income all alter the monthly computation. The client is supposed to report these to the Marketplace during the year; many do not, and the reconciliation on the return is where the consequence appears.
Employer coverage generally forecloses the credit. An individual eligible for employer-sponsored coverage that is affordable and provides minimum value cannot claim the premium tax credit for those months, whether or not they enrolled. The question at intake is therefore about what was offered, not only about what was taken.
The client just over the line
Aurelio Baptiste-Nwosu enrolled through the Marketplace and received advance premium tax credit payments throughout 2026. A late bonus pushed his household income to about 415 per cent of the poverty line for his family size.
For 2021 through 2025 this would have been survivable: the ceiling on eligibility was suspended and his credit would simply have been computed on a percentage of income. For 2026 it is not. Section 36B(c)(1)(E) suspended the words “but does not exceed 400 percent” only for taxable years beginning before 1 January 2026, so the ceiling operates again — and above it there is no credit at all, not a reduced one. Every dollar of advance payment made on his behalf is repayable. This is the single most consequential change on the 2026 individual return for Marketplace enrollees, and it needs to be raised with clients during the year rather than discovered in filing season.
The repayment that used to be capped
Perpetua Okonkwo-Lindqvist’s income came in higher than projected and her advance payments exceeded her actual credit by a substantial amount. Her preparer recalls a limitation that caps repayment for households below a stated income level and expects it to reduce the addition.
It has gone. Section 71305 of Public Law 119-21 removed IRC § 36B(f)(2)(B) — the provision that limited the tax increase from excess advance payments for certain households — effective for taxable years beginning after 31 December 2025. Rev. Proc. 2025-32 confirms it by removing that item from the annual inflation adjustments. For 2026 the excess is repayable in full regardless of household income. A preparer working from a remembered cap will understate the balance due.
Which 1095 is which
A client brings a Form 1095-B from a small employer’s insurer. Nothing was received from the Marketplace. The preparer is unsure whether the form needs entering.
It does not. Form 1095-B reports minimum essential coverage from a source other than the Marketplace, and it is informational. What it establishes is that the client had coverage — relevant to state requirements and to whether a premium tax credit could have been claimed, but not an entry on the federal return. Had the form been a 1095-A, the position would be the reverse: the monthly figures on it are indispensable. A 1095-C from an applicable large employer sits with the 1095-B as informational, and its significance is what it shows about an offer of coverage.
How this has changed
Three separate contractions have landed on this topic, and 2026 is the year the largest of them takes effect.
The individual mandate penalty was reduced to zero by the Tax Cuts and Jobs Act for months beginning after December 2018. The requirement in § 5000A survives; only the numbers were zeroed.
The American Rescue Plan Act of 2021, extended by the Inflation Reduction Act of 2022, did two things to the premium tax credit: it suspended the 400 per cent ceiling on eligibility and it substituted a more generous schedule of premium percentages. Both were written into the Code as temporary provisions expressly limited to taxable years beginning after 31 December 2020 and before 1 January 2026 — § 36B(c)(1)(E) for the ceiling and § 36B(b)(3)(A)(iii) for the percentages. Neither was extended. For 2026 both revert, which means a smaller credit across the income range and no credit at all above the ceiling.
Public Law 119-21 then made further changes in July 2025. Section 71305 removed the § 36B(f)(2)(B) limitation on repaying excess advance payments, effective for taxable years beginning after 2025. Section 71302(a) repealed § 36B(c)(1)(B), the special rule that had treated certain lawfully present individuals with household income below the poverty line as applicable taxpayers. The Act also amended § 36B(e) and added new paragraphs (5) and (6) to § 36B(c) concerning eligibility by immigration status.
The combined effect is that a Marketplace enrollee’s 2026 return can differ sharply from their 2025 one on identical facts. Where a client’s income is near the ceiling, that conversation belongs in the year, not in the filing season.
Exam focus
Know the three information forms and their sources: 1095-A from the Marketplace, 1095-B from other providers of minimum essential coverage, 1095-C from an applicable large employer. Know that the individual shared responsibility payment is zero while the requirement itself remains in the Code. Know that the premium tax credit requires household income between 100 and 400 per cent of the poverty line, that married taxpayers must file jointly, and that a dependent cannot claim it. Expect the 2026 reversion of the ceiling and the removal of the repayment limitation to be tested as changes.
Check yourself
1. Which form reports health insurance obtained from a source other than the Marketplace?
A. Form 1095-A B. Form 1095-B C. Form 1095-C D. All of these
Answer: B. Form 1095-A comes from the Marketplace; Form 1095-C comes from an applicable large employer.
2. What is the individual shared responsibility payment for 2026?
A. It is computed as a percentage of household income B. It is the greater of a flat dollar amount or a percentage of income C. Zero, because both limbs of the penalty computation now yield nothing D. The requirement to maintain coverage was repealed, so there is none
Answer: C. The requirement in § 5000A remains; only the penalty amounts were reduced to zero.
3. A taxpayer’s household income is 415 percent of the poverty line for their family size in 2026, and they received advance premium tax credit payments. What follows?
A. A reduced credit computed on a percentage of income B. No credit, and the advance payments are repayable C. The credit is unaffected, because the ceiling was suspended D. The credit is available but capped at the advance payments
Answer: B. The suspension of the 400 percent ceiling applied only to taxable years beginning before 1 January 2026.
4. Excess advance premium tax credit payments in 2026 are repaid in what amount?
A. Limited by a cap that varies with household income B. In full, regardless of household income C. Only to the extent they exceed the credit by more than a stated amount D. Not at all, if income was correctly projected at enrolment
Answer: B. The limitation in § 36B(f)(2)(B) was removed for taxable years beginning after 31 December 2025.
5. An employer averaged exactly 50 full-time employees during the preceding calendar year. Is it an applicable large employer?
A. No; the threshold is more than 50 B. Yes; the threshold is an average of at least 50 C. Only if it offers coverage D. Only if the employees are in a single location
Answer: B.
Change log
- Initial draft. Records that the 400 percent ceiling on premium tax credit eligibility and the temporary premium percentages both lapsed for taxable years beginning after 2025, and that the excess advance payment repayment limitation was removed.
Related topics
- Sources of tax payments and refundable credits (e.g., withholding, estimated payments, earned income tax credit) 1.1.1.k
- Filing requirements and due date 1.1.1.d
- Taxpayer biographical information (e.g., date of birth, marital status, dependents, identity protection PIN, state issued photo ID) 1.1.1.b
- Sources of applicable credits (e.g., education, foreign tax, retirement, child and dependent care, credit for other dependents, child tax credit) 1.1.1.j
- ACA net premium tax credit 1.3.2.g