Premium Tax Credit Updates for 2026 and Beyond: What California Taxpayers and Business Owners Need to Know

Recent updates from the IRS clarify major changes to the Premium Tax Credit (PTC) following the passage of the One, Big, Beautiful Bill (OBBB). These changes will directly impact individuals, freelancers, business owners, and families who purchase health insurance through the Health Insurance Marketplace—especially starting with tax years after 2025.

At Velin & Associates, Inc., we’ve been receiving questions from clients across many industries—from YouTubers and TikTok creators to Shopify store owners, Amazon sellers, doctors, dentists, and high net worth individuals—about how these updates affect refunds, repayments, and year-end tax planning. Below, we break down what’s changed, why it matters, and how these rules can affect real-world taxpayers.

What Is the Premium Tax Credit?

The Premium Tax Credit is a refundable federal tax credit designed to help eligible individuals and families with low or moderate income afford health insurance purchased through the Health Insurance Marketplace (Exchange).

Taxpayers can benefit from the credit in one of two ways:

1. Advance Premium Tax Credit (APTC) – Paid directly to the insurance company during the year to reduce monthly premiums.
2. Claimed on the tax return – Received as a refund or tax reduction when filing Form 8962 with the federal return.

Because the credit is refundable, eligible taxpayers may receive a refund even if they owe little or no federal income tax.

The Biggest Change: No Repayment Caps After 2025

One of the most important updates under OBBB is the removal of repayment caps for excess advance Premium Tax Credit payments for tax years beginning after December 31, 2025.

What this means:

• Before 2026: If you received too much APTC, repayment was capped based on income and filing status.
• After 2025: If your advance credit exceeds your actual allowable credit, you must repay the full difference, regardless of income level.

Example:

A freelance filmmaker in Los Angeles estimates their 2026 income at $65,000 and qualifies for substantial advance premium credits. During the year, a successful streaming deal pushes their actual income to $115,000.

Under the new rules, there is no repayment cap. When filing their return, the entire excess credit must be repaid, potentially reducing their refund or creating a balance due.

This change makes income forecasting and mid-year updates to the Marketplace more critical than ever.

Income Changes Can Create Costly Surprises

Household income for Premium Tax Credit purposes is based on modified adjusted gross income (MAGI), not just wages. This often surprises self-employed and high-income taxpayers.

Income events that can increase repayment exposure include:

• Capital gains from stocks or cryptocurrency
• Amazon or Shopify business growth
• One-time consulting contracts
• Retirement account distributions
• Debt forgiveness
• Bonus income or profit sharing

Example: 

A Shopify store owner projects modest profits early in the year and qualifies for APTC. By Q4, holiday sales significantly increase net income. Without updating the Marketplace, the advance credit becomes overstated—triggering a full repayment when the tax return is filed.

At Velin & Associates, we routinely advise online commerce clients to revisit Marketplace income estimates quarterly, especially during high-revenue seasons.

Employer Coverage, Side Businesses, and Eligibility Confusion

Many taxpayers assume that having employer coverage automatically disqualifies them from the Premium Tax Credit. That’s not always true.

Eligibility depends on whether the employer plan:

• Is affordable, and
• Provides minimum value

Example:

A medical professional working part-time for a clinic is offered employer coverage, but the employee-only premium exceeds affordability thresholds. The taxpayer also runs a small online consulting business.

If the employer coverage is deemed unaffordable, the taxpayer may still qualify for Marketplace coverage and the Premium Tax Credit—provided eligibility requirements are met.

These situations require careful analysis to avoid IRS repayment issues later.

Married Filing Separately: Limited but Important Exceptions

Generally, taxpayers who file Married Filing Separately are not eligible for the Premium Tax Credit. However, exceptions exist for victims of domestic abuse or spousal abandonment.

Example:

A content creator separates from their spouse mid-year and files separately due to documented abandonment. Under IRS rules, they may still qualify for the Premium Tax Credit if they properly certify eligibility on Form 8962.

This is an area where documentation and proper tax preparation are essential.

Why Form 8962 Is Non-Negotiable

If advance credits were paid on your behalf, you must file a federal tax return and attach Form 8962, even if you otherwise wouldn’t be required to file.

Failing to do so can:

• Disqualify you from future Marketplace subsidies
• Trigger IRS notices
• Delay refunds

This is especially common among self-employed individuals, gig workers, and creators who underestimate filing obligations.

Strategic Planning Matters More Than Ever

With repayment caps eliminated after 2025, proactive tax planning is no longer optional.

At Velin & Associates, we help clients:

• Model income changes before year-end
• Coordinate Marketplace estimates with real-time business performance
• Evaluate whether Marketplace coverage still makes sense
• Prepare for repayment exposure before filing season

This is particularly important for:

• CPA for YouTubers and TikTokers
• CPA for Shopify and Amazon businesses
• CPA for doctors and dental practices
• CPA for high net worth individuals with variable income

Final Thoughts

The updated Premium Tax Credit rules create higher risk—but also clearer expectations—for taxpayers using Marketplace insurance. While the credit remains a valuable tool, it now requires greater income accuracy, documentation, and planning, especially for business owners and self-employed professionals.

If your income fluctuates or your household situation changes during the year, addressing these issues early can prevent unpleasant surprises at tax time.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org

CPA for YouTubers | CPA for Shopify Store | CPA for Online Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | CPA for TikTokers | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals