What PTCs Are
Premium Tax Credits (PTCs) are federal tax credits that help eligible individuals and families pay for health insurance bought through the Marketplace, such as Covered California or Nevada Health Link. See the IRS’s Premium Tax Credit: The Basics.
PTCs can be:
- Paid in advance directly to the insurance carrier each month, lowering the person’s premium, or
- Claimed when filing taxes
Either way, people who receive PTCs reconcile them on their federal tax return.
Who Qualifies
In general, a person may qualify for a PTC if they enroll through the Marketplace, have household income within the eligible range, and aren’t eligible for other qualifying coverage, such as Medicare, Medicaid, or employer coverage that’s affordable and provides minimum value.
For 2026: The temporary “enhanced” PTCs, which removed the upper income limit and lowered costs for many enrollees, expired at the end of 2025. For 2026, PTCs are generally available to households with income between 100% and 400% of the federal poverty level.
Why PTCs Matter to Employers
PTCs are the link between Marketplace coverage and the employer mandate. An Applicable Large Employer (ALE) may owe a penalty only if at least one full-time employee enrolls in Marketplace coverage and receives a PTC they qualify for:
- §4980H(a): If the ALE doesn’t offer coverage to at least 95% of full-time employees, a full-time employee receiving a PTC can trigger this penalty.
- §4980H(b): If the ALE offers coverage, but it isn’t affordable or doesn’t provide minimum value, a full-time employee who receives a PTC they qualify for can trigger this penalty.
The IRS identifies these employees using employees’ tax returns and the employer’s Forms 1094-C and 1095-C, and lists them on Form 14765 with a Letter 226-J. See Employer Mandate Penalty Enforcement Process.
Important: This information is provided for general educational purposes and reflects the rules as of November 2026. It is not legal or tax advice. How these rules apply depends on each employer’s specific circumstances, so employers should review their situation with their own legal counsel, ERISA attorney, CPA or tax advisor.