IRS proposes new rules limiting Premium Tax Credit eligibility

The Internal Revenue Service has issued a notice of proposed rulemaking to amend 26 CFR part 1 governing an individual taxpayer's eligibility for the Premium Tax Credit (PTC), the computation of the credit, and liability for excess advance payments. The proposed regulations bind any individual who enrolls themselves or a family member in health insurance through a Health Insurance Exchange and may be eligible for a PTC.

The rule adds two new exclusions to the definition of a qualified health plan. For taxable years beginning after Dec 31 2027, a plan that the Exchange enrolls without the pre-enrollment verification process described in section 36B(c)(3)(A)(ii) will not qualify. For plan years beginning after Dec 31 2025, a plan enrolled during a special enrollment period based on a change in expected household income will also be excluded.

Section 71302(a) of the One, Big, Beautiful Bill Act removes the provision that allowed lawfully present aliens with household income below 100 % of the Federal Poverty Level to claim the credit when ineligible for Medicaid. Effective for taxable years after Dec 31 2025, such taxpayers will no longer be eligible for the PTC.

The proposal clarifies that a month is not a coverage month when an Exchange determines the enrollee ineligible for Medicaid, and it reiterates the standards for reckless or intentional disregard of information supplied to an Exchange.

Comments must be submitted electronically by Nov 30 2026 via regulations.gov, referencing REG-101576-26. A telephonic public hearing is scheduled for Dec 8 2026 at 10 a.m. ET; requests to speak and outlines are due Nov 30 2026, and attendance requests by 5 p.m. ET on Dec 4 2026.