How are premium tax credits calculated for 2026 Affordable Care Act plans?

Executive Summary

Premium tax credits for 2026 Marketplace plans are calculated by comparing a household’s expected contribution—set by the federal Applicable Percentages—to the cost of the local benchmark plan (the second-lowest-cost silver plan); the credit equals the difference and shrinks as household income rises ^{[1] [2] [3]}. Policy changes and the scheduled expiration of enhanced credits at the end of 2025 mean the formulas that determine those expected contributions will shift in 2026, producing materially higher net premiums for many enrollees unless Congress acts or states provide offsetting assistance ^{[4] [5] [6]}.

1. How the math works — the benchmark and the household share that drives the credit

The Affordable Care Act’s credit formula first identifies the benchmark plan (the second-lowest-cost silver plan) in a person’s county, then computes the household’s expected contribution as a percentage of Modified Adjusted Gross Income (MAGI). The premium tax credit equals the benchmark premium minus that expected contribution; enrollees can apply the credit to any plan and pocket the difference if they choose a cheaper plan ^{[1] [2]}. This mechanism ties assistance directly to local premium costs and household income, creating a sliding-scale subsidy that declines with greater income and varies by geography, family size, and ages of covered people ^{[7] [3]}. Understanding both the benchmark and MAGI is essential to predicting individual subsidy amounts.

2. The Applicable Percentages table — the policy lever that changes payouts

The crucial input is the Applicable Percentages table, which sets the percentage of income households are expected to pay toward the benchmark premium. Analyses point to a scheduled change in those percentages for 2026 that would raise the share of income families must pay, reducing credits for many ^{[1] [6]}. One estimate maps the sliding scale from about 2% of income for those at 100% of the federal poverty line up to roughly 9.96% for those between 300–400% of FPL under current statutory parameters—numbers cited by fiscal analysts and policy groups highlighting the direct impact on out-of-pocket premiums ^[8]. Shifts in these percentages are the most immediate driver of subsidy increases or decreases.

3. Enhanced credits expiring — who loses and by how much

Several sources emphasize that the temporary, enhanced premium tax credits enacted in 2021 are set to expire at the end of 2025 unless extended, producing large increases in 2026 for many enrollees. Independent modeling finds average net premiums could more than double for some enrollees—estimates such as a rise from $888 in 2025 to $1,904 in 2026 illustrate the scale of the change if enhancements lapse ^{[4] [5]}. Policy briefings stress that nearly all Marketplace enrollees currently benefit from subsidies, and expiration would push more people into higher effective premium burdens and raise marginal replacement rates for wage increases ^{[6] [1]}. This dynamic informs enrollment decisions and the political debate over extending subsidies.

4. Tools, assumptions, and what estimators leave out

Practical calculation often uses online calculators that take ZIP code, household size, ages, and MAGI to estimate credits, but analysts warn those tools depend on assumptions about local plan offerings, tobacco surcharges, and nonstandard benefits that can meaningfully change results ^{[2] [7]}. Calculations also assume stable incomes and plan availability, while real-world factors like income churn, midyear life events, and state-level add-on subsidies produce diverging outcomes. Estimates that ignore these frictions can understate both the variability and distributional consequences of formula changes, meaning headline numbers must be read alongside the modeling assumptions.

5. Competing narratives and what to watch in 2026

Analyses frame the 2026 calculation changes in different lights: fiscal watchdogs highlight long-term budgetary trade-offs and distributional effects ^[8], consumer advocates emphasize the immediate affordability hit if enhanced credits end ^{[5] [6]}, and technical write-ups focus on the mechanics of the Applicable Percentages and benchmark selection ^{[1] [3]}. Each perspective signals different policy priorities—deficit control, consumer protection, or program integrity—and helps explain why Congress and states face competing pressures. Watch for legislative action or state-level interventions during Open Enrollment that could alter the practical outcome for enrollees in 2026.