IRS proposes rules limiting Obamacare tax credits

Key insight: Discover how proposed federal regulations will restrict eligibility for Premium Tax Credits.
What’s at stake: Unverified marketplace enrollees and taxpayers as federal agencies tighten health subsidy eligibility criteria.
Expert quote: “Hardworking American taxpayers should not be forced to subsidize health care…” — Scott Bessent, Treasury Secretary

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The Internal Revenue Service and the Treasury Department issued proposed regulations Wednesday restricting eligibility for Premium Tax Credits for health insurance to U.S. citizens, U.S. nationals, and some lawfully present noncitizens, as well as adding new verification criteria for any advance PTC payments.

The proposed regulations implement provisions of last year’s One Big Beautiful Bill Act, which Republicans have rebranded as the Working Families Tax Cuts, limiting eligibility for many tax breaks to U.S. citizens.

“Hardworking American taxpayers should not be forced to subsidize health care for people who are ineligible under federal law,” said Treasury Secretary Scott Bessent in a statement Wednesday. “Today’s proposed rules implement the common-sense reforms enacted by the Working Families Tax Cuts to close eligibility loopholes and ensure taxpayer-funded Premium Tax Credits are reserved for eligible Americans. Under President Trump, this Administration is cracking down on fraud and corruption; holding bad actors accountable; lowering health care costs for Americans; and restoring integrity to our tax code and health care system.” 

Starting in 2027, taxpayer-funded health insurance subsidies under the Affordable Care Act will go only to Americans who qualify under federal law, according to the proposed rules. PTC eligibility will be limited to U.S. citizens, U.S. nationals, and certain lawfully present noncitizens. The IRS, the Treasury and the Centers for Medicare and Medicaid Services will apply eligibility checks and add new verification criteria for any advance PTC payments.

“The proposed rules protect eligible taxpayers while strengthening the integrity of the Premium Tax Credit,” said IRS CEO Frank Bisignano in a statement. “The enhanced verification measures are designed to curb improper claims, ensuring these vital tax benefits go strictly to the hardworking Americans who qualify for them.”

The Trump Administration has set up a Task Force to Eliminate Fraud and says it found evidence of fraud in the federal health insurance marketplace. 

The Centers for Medicare & Medicaid Services recently announced the removal of more than 760,000 unverified “phantom” enrollees from the rolls of the Affordable Care Act, resulting in $2.2 billion in savings and sending nearly 1 million Americans $500 each who had been overcharged for their Obamacare coverage.

“The Trump Administration’s whole-of-government approach to fighting fraud, waste and abuse is built on the idea that an ounce of prevention is worth a pound of cure,” said CMS administrator Dr. Mehmet Oz, in a statement. “Ensuring health programs serve only those who are eligible is one of the most effective ways to protect these programs and the taxpayers who support them. With today’s proposed rules, the Treasury Department is taking another step forward in our collaborative effort to protect taxpayer dollars by shutting down waste and fraud before a single dollar leaves the building.”

Introductory bullet points created by AI with editorial review.