Estimating Your Income for ACA Subsidies (and Form 8962 Reconciliation)
Your ACA subsidy is based on income you estimate before the year begins — then squared up against what you actually earned when you file taxes. Get the estimate roughly right and the process is painless. Get it badly wrong, especially in 2026, and you can owe a lot back. Here's how to estimate well and what reconciliation means.
- You report an estimate of your MAGI for the coverage year — not last year's income.
- Your advance credit is reconciled on Form 8962 against your actual income.
- Underestimate and you repay the excess; overestimate and you get the rest back.
- 2026 risk: the repayment cap is gone — cross 400% of poverty and you repay the full advance credit.
What to estimate
The Marketplace asks for your household's Modified Adjusted Gross Income (MAGI) for the coverage year — the year you'll actually be insured. For 2026 coverage, that's your projected 2026 income, not your 2025 return. ACA MAGI is your Adjusted Gross Income plus tax-exempt interest, excluded foreign income, and the non-taxable portion of Social Security, for everyone in your tax household. (It's defined differently from Medicare's version — see MAGI: ACA vs IRMAA.)
How to build the estimate
- Start from a known baseline. Last year's AGI is a reasonable starting point if nothing big has changed.
- Adjust for what's different. A new job or raise, a job loss, going self-employed, a planned Roth conversion or asset sale, a change in household size — each moves the number.
- Subtract above-the-line deductions. Traditional retirement contributions, HSA contributions, and (if self-employed) the self-employed health insurance deduction all lower MAGI.
- For variable or self-employed income, estimate conservatively, and consider taking less of your credit in advance so a good year doesn't create a repayment.
Test your estimate
Plug different income figures into our ACA Subsidy Calculator to see how your credit — and your distance from the 400% cliff — changes before you commit a number to the Marketplace.
Try my income scenarios →Reconciliation on Form 8962
When you file your taxes, Form 8962 compares two numbers: the advance premium tax credit (APTC) you received each month, and the credit you actually qualified for based on your final income. The Marketplace gives you the inputs on Form 1095-A (including your benchmark SLCSP in Column B). The result is either:
- You took too little in advance → you claim the remaining credit, increasing your refund.
- You took too much in advance → you repay the excess with your return.
If you guess wrong
Small misses are normal and the reconciliation handles them. The danger zone in 2026 is the 400% cliff: if you estimated under 400% of poverty, took advance credits all year, and your actual income lands over 400%, you must repay everything you received — the 2026 law removed the cap that used to limit repayments for lower-income filers. That can be thousands of dollars. The safest moves near the cliff are to estimate conservatively, take only part of your credit in advance, or use pre-tax contributions to keep your final MAGI under the line.
Update income mid-year
You don't have to wait until tax time to fix a bad estimate. If your income changes during the year — a raise, a layoff, a strong quarter — update your application at HealthCare.gov or your state Marketplace. It recalculates your advance credit going forward, smoothing out what you'd otherwise owe (or be owed) at filing. Reporting changes promptly is the simplest way to avoid a year-end surprise.
Run the numbers
See your estimated credit, your percent of poverty, and your cliff distance for any income you enter.
Open the ACA Subsidy Calculator →Frequently asked questions
Do I use this year's or last year's income?
This year's — your estimated MAGI for the coverage year itself. The Marketplace reconciles it against your actual income later.
What if I underestimated and my income went up?
You repay the excess advance credit on Form 8962. In 2026 there's no repayment cap if you end up over 400% of poverty, so the bill can be large.
Where do I get the numbers for Form 8962?
From Form 1095-A, which the Marketplace sends early in the year — including your SLCSP benchmark in Column B.
Should I take the credit in advance?
It's optional. Taking less in advance reduces repayment risk if your income rises; you claim any remaining credit at tax time.
Sources
- IRS — About Form 8962 and The Premium Tax Credit — The Basics
- HealthCare.gov — What to include as income and reporting income changes
Educational only — not tax advice. Confirm your figures on the Marketplace and with a tax professional.