IRS proposes premium tax credit rules, and the repayment cap is gone
Proposed IRS rules published on 15 October 2026 put the One, Big, Beautiful Bill Act's premium tax credit changes into the regulations, including full repayment of excess advance payments. Comments are due 30 November 2026.
Most of what this proposal does was already decided by Congress. On 15 October 2026, the Treasury Department and the IRS published proposed regulations under section 36B of the Internal Revenue Code, the premium tax credit that helps people pay for health coverage bought through an Exchange. The proposal writes into 26 CFR part 1 the changes made by "sections 71119 and 71301 through 71305 of Public Law 119-21," which the notice says is "commonly known as the One, Big, Beautiful Bill Act (OBBBA)."
The direct audience is individual taxpayers. The proposal "would affect taxpayers who enroll themselves or a family member in individual health insurance coverage through a Health Insurance Exchange." The agencies put that at "about 15.6 million total individuals enrolled in Exchange coverage," and say it may also affect "the 22 State-Based Exchanges."
Employers and lenders still have a stake, because some of those 15.6 million people are part-time staff, early retirees, borrowers and members, and a few of these changes arrive as a tax bill.
The repayment cap goes away
The change people will notice first is at filing time. Many Exchange enrollees get the credit in advance, paid straight to their insurer each month, and then square up on their tax return. If their income came in higher than they estimated, they owe some of it back. Until now, a limit in section 36B(f)(2)(B) could cap how much of that a taxpayer had to repay.
That limit is gone. In the notice's words, "Section 71305 removes section 36B(f)(2)(B), effective for taxable years beginning after December 31, 2025." Under the proposal, "a taxpayer's tax liability for the taxable year of the coverage is increased by the full amount of the excess APTC."
The agencies estimate that "in 2028, approximately 3.7 million returns will include a repayment of excess APTC." A household that underestimates its 2026 income finds out when it files its 2026 return.
Who loses eligibility, and when
The dates are staggered, which makes this easy to misread:
| Change | Applies |
|---|---|
| Repayment cap removed (OBBBA section 71305) | Taxable years beginning after 31 December 2025 |
| Lawfully present aliens with income under 100 percent of the poverty line no longer eligible (section 71302(a)) | Taxable years beginning after 31 December 2025 |
| Coverage bought through an income-based special enrollment period no longer counts | Plan years beginning after 31 December 2025; the proposed rule applies to plan years beginning on or after 15 October 2026 |
| Narrower group of aliens who can claim the credit (section 71301) | Taxable years beginning after 31 December 2026 |
| New Exchange verification rules, sections 36B(c)(5) and (c)(6) (section 71303(a)) | Taxable years beginning after 31 December 2027 |
There is also a link to the new Medicaid work rules, which the notice calls community engagement. States "must implement community engagement requirements no later than January 1, 2027." Under the proposal, someone denied Medicaid only for failing that requirement is treated as having minimum essential coverage, so those months "would not be coverage months for the individual" and earn no credit. That one is easy to miss, since it reads like a Medicaid rule.
A change for newborns
One change goes the other way. The proposal lets the Exchange pay advance credits for a newborn added through a special enrollment period before verification is finished. The agencies estimate "roughly 50,000 families with newborns will benefit" and put the average monthly advance credit for newborn coverage at "approximately $222."
What it does not change
Employers that file coverage reports can relax a little. The notice says "Nothing in these proposed regulations affects any information reporting requirements for employers," citing sections 6055 and 6056.
Dates
Comments "must be received by November 30, 2026." A telephonic public hearing is set for "December 8, 2026, at 10 a.m. ET," and requests to speak, with outlines, are due by 30 November 2026.
What it could mean
Our view is that the repayment change will be the one people feel. The rest is mostly eligibility plumbing that Exchanges and the IRS will handle.
For employers, we'd expect more questions from staff who are on Exchange coverage rather than the company plan, mostly part-timers and people still in a waiting period. HR teams don't owe anyone tax advice, but a short note in open enrollment material reminding people to update their income with the Exchange during the year costs very little.
For banks and credit unions, we think the effect shows up on the consumer side in early 2027. A household that expected a refund and gets a bill instead may lean on a credit card or fall behind on a loan payment. If your institution offers short-term loans timed to tax season, our guess is it's worth looking at whether this group changes your expected volume or losses.
None of that is certain. The proposal could change before it is final, though the statutory changes behind it take effect on their own dates whatever the final text says. Check whether your own staff and customer base lean on Exchange coverage before deciding how much of this matters to you.