When you enroll in the Marketplace they ask how much you're going to earn this year. Not how much you earned last year: how much you're going to earn. Your subsidy comes from that number, and until now getting it wrong had a limit. As of tax year 2026, it doesn't.
What changed and why you should read this
For years, if at tax time it turned out you earned more than you said, there was a cap on what the IRS could claw back from the subsidy you received in excess. Depending on your income, that cap ran from a few hundred to a few thousand dollars.
The 2025 law eliminated that cap. Starting with tax year 2026 you repay the full excess, with no limit. If you received $9,000 in subsidy and were entitled to $3,000, you owe $6,000.
Before, underestimating your income was an expensive mistake. Now it can be a mistake worth thousands of dollars.
What counts as income
The Marketplace uses a figure called MAGI, which is your adjusted gross income with a few things added back. In practice, for most people:
| Counts | Doesn't count |
|---|---|
| Wages and tips | Child support you receive |
| Self-employment, after expenses | In-kind public assistance |
| Unemployment | Student loans |
| Pensions and retirement account withdrawals | Money from a gift or inheritance |
| Social Security, including the non-taxable portion | Tax refunds |
| Rent, interest and dividends | Workers' compensation |
And note: it's the income of the entire tax household, not just yours. If you file jointly with your partner, both count. If you claim someone as a dependent and that person works, their income may count too.
The three mistakes I see most
One: reporting last year's income. They're asking about this year. If you changed jobs in March, last year's number is useless.
Two: not counting self-employment. If you do cleaning, construction, nails, deliveries or anything on your own, that's income. You can deduct business expenses, and there a lot of people are overly conservative and report more than they need to.
Three: not reporting it when it changes. If you get a raise in June or start a second job, it has to be updated in the Marketplace that month, not in April of the following year. Updating on time adjusts the subsidy gradually; not doing it leaves you with a bill all at once.
If your income is irregular
It's the most common case among my clients and it doesn't have to be a problem. If you work seasonally, variable hours or for yourself, you make a reasonable estimate for the full year, not a snapshot of your best month.
The practical way: add up what you've earned so far this year, work out the monthly average and multiply by twelve. Adjust it if you know a high or low season is coming. And keep a record of how you calculated it — if the Marketplace asks you to justify it, that sheet saves you.
What happens if you go too low
It happens the other way too: if you reported more than you ended up earning, you received less subsidy than you were entitled to, and that difference comes back to you at tax time. There's no penalty there, just money you were fronting unnecessarily.
That's why I don't recommend "reporting extra just in case". You're paying out of pocket all year for money they'll return to you twelve months later.
How I do it with you
We go over where every dollar in the household comes from, work out a projection you can justify, and I make clear at which points in the year you need to tell me if something changes. Ten minutes that avoid a four-figure bill.
If you'd rather see the big picture of what's coming first, it's in Obamacare 2027: what's at stake.
Not sure what number to put?
We work it out together, with your paperwork in front of us. Free and with no obligation.
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Sources
General information, not legal, tax or immigration advice. The rules can change. For your specific case, message me. Omar Mendoza, licensed agent — NPN 21726482.