Why does leaving a job create a subsidy repayment?

Because the advance subsidy was set from an income estimate, and severance, PTO cash-out, or a new salary can push actual income above it. The reconciliation happens on Form 8962 using Form 1095-A, so gather the forms before you file rather than after.

When should I report an income change to the marketplace?

Within 30 days of the change, per this site's marketplace guidance. Report job losses, new jobs, severance streams that stop, and household changes, and keep the confirmation number and date so a later dispute has a documented history.

Do I need a 1095-C from an employer I left mid-year?

Yes. Each employer reports the months coverage was offered and the employee share of the premium, and the IRS matches those months against your W-2 and marketplace forms. Download it before payroll and benefits portals lock at separation.

Should I compare COBRA with the marketplace during the gap?

Yes, inside the same enrollment window. COBRA keeps the group plan at full cost, while a subsidized marketplace plan is often cheaper and changes with income. Price both, then update the estimate when severance payments stop.

W-2, ACA & Subsidy Reconciliation

ACA subsidies reconcile against actual income at year-end: W-2 jumps, severance, and gig income raise the household number, and the premium tax credit claws back on the form 8962 line. Plan the reconciliation in January, not April (see the marketplace guide).

The Lines

1095-A & 8962: the marketplace form reports monthly coverage; the IRS cross-checks the subsidy against income. The employer trail is in the 1095-C guide.
Income jumps: severance, PTO cash-out, and new W-2 wages stack in one year; the year crossing is in the new-year guide and the W-2 timing in the W-2 timing guide.
30-day notice: change circumstances within 30 days of coverage loss, moves, and income shifts; the special enrollment window is in the COBRA guide.

State lines follow the work location in the remote termination guide, and the settlement income in the state tax guide. The comp archive is in the records guide.

Put the rule into action

Write the letter with the free Final Paycheck Demand Letter generator. The state pages carry the local payout and notice windows, and the application tracker keeps the follow-up date in writing.

Put the rule into action

Form 1095-C — what it means and what to do

The January Reconciliation, Step By Step

Direct answer: marketplace subsidies are prepaid on an estimate and settled on real income, so an exit year almost always needs a reconciliation. Work it in January, not April, because the two forms that decide the answer arrive early and the math is easier while you can still change something. Five steps.

Collect Form 1095-A from the marketplace, Form 1095-C from every employer, and every W-2. The 1095-C entry explains the employer side and the missing-month problem.
Write the actual household income for the year: both W-2 totals, severance, PTO cash-out, 1099 income, and unemployment benefits.
Compare it with the estimate you used to buy coverage. If the estimate was low, the credit is repaid on Form 8962, which reconciles the advance payments against the credit you were actually eligible for.
Check the coverage months. Two employers plus a marketplace plan can split a year three ways, and gaps create months with no coverage.
File the change-of-circumstance update for the current year's subsidy, then repeat the comparison whenever income changes. See ACA special enrollment.

What Pushes The Repayment Up

Four exit events raise the income number after the subsidy was already set. Know them before you file, and report them as they happen.

Severance, paid in the year you received it. A lump sum lands in one year and can move you past the estimate; the reporting-year mechanics are in the W-2 entry.
Accrued PTO cash-out and bonus true-ups, both reported as wages.
Equity income at vesting, which can dominate a year even after you left the company; see the Equity & Tax guides.
Gig income reported on a 1099, which is easy to forget because no employer withholds for it.
A raise at the new job that arrives mid-year, changing the estimate you filed in March.

Repayment caps exist for modest overages but not for large ones, so the honest approach is to update the estimate rather than hope the difference is small. Price the alternative coverage in the COBRA Cost Calculator when you are comparing COBRA against a subsidized marketplace plan; the subsidy question is the reason the comparison changes year to year.

The 30-Day Change-Of-Circumstance Habit

The habit that prevents a surprise bill is small and boring: report changes within 30 days, per this site's marketplace guidance.

Report loss of employer coverage, a new job, a marriage or birth, an income change, and an address change as they happen.
Keep the confirmation number and the date for every update. A dispute about a subsidy is argued from the update history.
When severance ends, re-file the estimate. A stream that stops mid-year lowers income, which raises subsidy eligibility, and nobody updates it for you.
Reconcile at tax time even if nothing changed, because two coverage sources in one year still require the form.
Keep one folder: 1095-A, 1095-C forms, W-2s, and the update confirmations. Log the update dates on the tracker.

State lines follow the work location rather than the office, which changes both the tax return and the coverage question; see remote termination jurisdiction and the state pages. The 60-day enrollment window after coverage loss is the same window where you should compare COBRA against a subsidized plan before electing.

Document	Comes From	Used To Check
Form 1095-A	The marketplace	Advance payments and covered months
Form 1095-C	Each employer	Months coverage was offered and affordability
Form W-2	Each employer	Actual wages including severance and PTO
Form 1099	Clients and platforms	Gig income that no employer withheld for
Form 8962	Your return	Reconciling the credit against the advance payments

Before you rely on a date or an amount on this page, check it against the California Final Pay rule page and the Colorado Final Pay rule page, along with the Final Paycheck definition. Rules move, and those pages carry the current text.

Frequently Asked Questions

Why does leaving a job create a subsidy repayment?: Because the advance subsidy was set from an income estimate, and severance, PTO cash-out, or a new salary can push actual income above it. The reconciliation happens on Form 8962 using Form 1095-A, so gather the forms before you file rather than after.
When should I report an income change to the marketplace?: Within 30 days of the change, per this site's marketplace guidance. Report job losses, new jobs, severance streams that stop, and household changes, and keep the confirmation number and date so a later dispute has a documented history.
Do I need a 1095-C from an employer I left mid-year?: Yes. Each employer reports the months coverage was offered and the employee share of the premium, and the IRS matches those months against your W-2 and marketplace forms. Download it before payroll and benefits portals lock at separation.
Should I compare COBRA with the marketplace during the gap?: Yes, inside the same enrollment window. COBRA keeps the group plan at full cost, while a subsidized marketplace plan is often cheaper and changes with income. Price both, then update the estimate when severance payments stop.

The affordability codes, the subsidy months, and the reconciliation math follow the W-2 and 1095-C lines, and the plan-size rule that routes coverage to state continuation is a state rule graded in this build. Confirm the continuation length with the state agency named on the state rule pages, keep the 1095-C from every employer in the year, and pull the year-to-date wage lines through the final-paycheck calculator so the final statement matches the W-2.