The Treasury Department and Internal Revenue Service announced proposed rules this week to tighten eligibility checks for federal health insurance tax credits under President Donald Trump’s Working Families Tax Cuts.
Treasury said the proposal targets improper claims for the Premium Tax Credit, which helps eligible taxpayers pay for insurance through Affordable Care Act exchanges. The department described eligibility changes beginning in 2027, with credits limited to U.S. citizens, U.S. nationals and certain lawfully present noncitizens.
“Hardworking American taxpayers should not be forced to subsidize health care for people who are ineligible under federal law,” Treasury Secretary Scott Bessent said in the department’s release.
The proposal adds verification criteria for advance credit payments, according to Treasury. The department said it expects the Department of Health and Human Services to propose related changes governing how exchanges carry out the verification requirements.
The announcement describes proposed regulations, rather than a final rule. Treasury attributed the changes to reforms Congress enacted through the Working Families Tax Cuts.
For consumers, advance payments help cover monthly insurance bills. The IRS explains that eligible taxpayers can have the marketplace send those payments directly to their insurer. The credit is refundable, meaning eligible people can benefit even when they have little or no income tax liability.
Taxpayers who receive advance payments must file a federal tax return to reconcile those payments with the credit they actually qualify for, according to IRS guidance. The agency advises recipients to promptly report changes in household income, family size, address, and eligibility for coverage through an employer or a government program.
The IRS says reporting those changes can reduce the risk of a large repayment when taxpayers file their returns. Changes can also mean a household qualifies for additional advance payments.
The proposed regulations will be published in the Federal Register on October 15.
