Premium Tax Credit (PTC)

The Premium Tax Credit (PTC) is a refundable federal tax credit established under IRC §36B that helps eligible individuals and families pay for health insurance purchased through a public Marketplace (HealthCare.gov or a state-based Marketplace). The credit is calculated as the difference between the cost of the second-lowest-cost silver plan available to the household and the percentage of household income the law expects the household to contribute toward premiums.

Eligibility (2026)

• Household income at or above 100% of the Federal Poverty Level. The Inflation Reduction Act of 2022 (extended through tax year 2025 by the Inflation Reduction Act extension) removed the upper income cap, so households above 400% of FPL may qualify for a PTC if Marketplace premiums for the benchmark plan exceed the household contribution percentage of household income.
• Enrolled in a qualified health plan through a Marketplace.
• Cannot be eligible for affordable employer-sponsored coverage that meets the minimum-value standard.
• Cannot be eligible for other minimum essential coverage (Medicare, Medicaid, CHIP, TRICARE, etc., with narrow exceptions).

Interaction with employer HRAs

If an employee is offered an affordable ICHRA, the employee is treated as having access to affordable employer-sponsored coverage and is not eligible for a PTC for the months covered by the ICHRA offer. If the ICHRA is unaffordable (the employee’s required contribution for the lowest-cost silver self-only plan in their rating area exceeds the applicable percentage of household income), the employee may decline the ICHRA and claim the PTC for Marketplace coverage instead. Employees offered a QSEHRA may have their PTC reduced by the employer’s QSEHRA contribution.

2026 affordability threshold

For plan years beginning in 2026, the required contribution percentage under §36B(c)(2)(C)(i)(II) is 9.96%, set by IRS Revenue Procedure 2025-25. An employer-sponsored plan or ICHRA offer is considered affordable if the employee’s required contribution for self-only coverage (or, for an ICHRA, the employee’s required contribution for the lowest-cost silver self-only plan in their rating area, less the ICHRA contribution) does not exceed 9.96% of the applicable affordability safe-harbor income.

Citations: IRC §36B; 26 CFR §1.36B-2; 26 CFR §1.36B-3; IRS Rev. Proc. 2025-25; ICHRA final rule, 84 FR 28888.

This page provides general information for plan sponsors and is not legal, tax, or compliance advice. Consult a qualified benefits attorney or tax advisor for situation-specific guidance, and verify all values against the most recent IRS Notice or Revenue Procedure before filing.