2027 Marketplace enrollment brings new tax implications

With Marketplace open enrollment underway, be ready to tell clients they can keep Marketplace insurance for 2027 but may still lose the tax credit that helped pay for it. Now that taxpayers must repay all excess advance premium tax credit (APTC) funds starting with tax year 2026, setting expectations can help prevent a surprise bill at tax time.

Renewing coverage does not lock in the credit

For most states using HealthCare.gov, enrollment for 2027 coverage runs from Nov. 1, 2026, through Jan. 15, 2027. For Jan. 1 coverage, act by Dec. 15. State-run Marketplaces may use differing deadlines.

• Some current enrollees may be automatically reenrolled for 2027, although their plan or APTC amount may change. The One Big Beautiful Bill Act (OBBBA) did not end that process.
• HealthCare.gov advises enrollees to update their projected income and household information annually.

With the enhanced premium tax credits available through 2025 now expired, the general household income range for PTC eligibility in 2026 and 2027 is again 100% through 400% of the federal poverty level (FPL), subject to exceptions and other eligibility requirements. A taxpayer whose household income exceeds 400% of the FPL can't claim the credit, even if Marketplace coverage continues.

Update income to avoid surprises at tax time

The tax credit on the return depends on the client's actual household income and eligibility.

Take Demi, a self-employed artist who elects substantial APTC based on modest projected earnings for 2027 but then lands a lucrative commission in July. The APTC already reduced her premiums, but her higher income could reduce or eliminate her final credit.

For tax years beginning in 2026, OBBBA eliminated the income-based caps on repayment of excess APTC. If the allowable premium tax credit (PTC) is lower than the advance payments, the full difference increases the client's tax liability. This applies to 2026 coverage reconciled on returns filed in 2027, and to 2027 coverage reconciled in the following filing season.

Clients can report income changes to the Marketplace during the year and choose to take less APTC in advance. These decisions matter more when income fluctuates or approaches the 400% threshold.

Keep the Form 1095-A connection

Form 1095-A, Health Insurance Marketplace Statement, supplies the policy information used to reconcile APTC on Form 8962, Premium Tax Credit (PTC). Several situations commonly arise with these forms.

• Form 1095-A is frequently missing, delaying reconciliation work. Make sure this topic is on your intake questionnaire and direct the client to the Marketplace to obtain a copy.
• A policy covering people in different tax families can require allocation of policy amounts, such as when one parent enrolls a child claimed by the other parent; this may require the taxpayers to allocate policy amounts on their respective Forms 8962 using the applicable Form 1095-A information.
• For clients claiming a deduction under §162(l), the self-employed health insurance deduction (SEHID) and PTC must be calculated together. IRS Publication 974, Premium Tax Credit (PTC), explains the circular coordination methods.

Four questions to ask before your clients’ Marketplace renewals

Ask these questions during your preseason client conversations to catch issues before renewal:

• Which Marketplace and renewal deadlines apply? Look at the renewal notice and confirm the correct deadline for the client's state.
• What is the client's expected 2027 household income? Consider likely changes and whether the estimate is near the 400% threshold.
• How much APTC will the client accept? Discuss updating the Marketplace estimate or taking less in advance if repayment exposure is high.
• What will you need to file? Obtain Form 1095-A and determine whether any shared policy allocation applies. For self-employed clients, address the SEHID calculation.

For self-employed clients, Marketplace coverage adds another layer to the tax calculation. NATP's article, "Common pitfalls when reporting SEHI deductions and premium tax credits," takes a closer look at how the deduction and credit work together, with additional guidance available through the Coordinating SEHI Deductions and Premium Tax Credits on-demand webinar.