IRS and Treasury propose new Premium Tax Credit eligibility rules

The IRS and the Treasury Department have proposed new regulations to implement changes to the Premium Tax Credit (PTC) as enacted by the OBBBA legislation. The proposal introduces stricter eligibility and verification requirements for health insurance tax credits.

Key changes include updated reporting rules for marketplaces and the repeal of limits on the repayment of excess advance premium tax credits (APTCs). For tax years beginning after December 31, 2025, taxpayers who received more advance credits than they qualified for will no longer be protected by income-based repayment caps. The Treasury estimates that approximately 3.7 million returns in 2028 will involve the repayment of excess APTCs.

Additionally, the regulations aim to tighten verification procedures. Starting after December 31, 2027, a month will generally not qualify for the credit unless the exchange verifies enrollment information, including household income, family size, and eligibility status. Treasury Secretary Scott Bessent stated the reforms aim to “close eligibility loopholes and ensure taxpayer-funded Premium Tax Credits are reserved for eligible Americans,” specifically targeting the exclusion of certain non-eligible individuals from credit calculations.