What happens if your annual income ends up being too low for a tax credit?
If you receive an advance premium tax credit and then your income actually ends up being under 100 percent of the poverty level (aka, within the Medicaid gap) when you file your 2023 federal tax return, you do not have to pay back the subsidy; this is outlined in the Form 8962 instructions (Page 8, line 6, under “Estimated household income at least 100% of the federal poverty line”). Here's a very helpful one-pager on the subject: Coordination between Medicaid and Premium Tax Credits.
However, IRS Publication 974 clarifies that the exception above does not apply if "with intentional or reckless disregard for the facts, you provide incorrect information to the Marketplace for the year of coverage. You provide information with intentional disregard for the facts if you know that the information provided is inaccurate." What this means is that the IRS forbids you from intentionally reporting an income that you know is inaccurate.
Our recommendation to is to estimate your 2023 income optimistically, using previous years' income to start. The marketplace may request proof of income documents after you apply if your reported 2023 income does not match tax records from previous years. If you think it's possible that you may earn an annual income close to what you had earned in previous years, it's appropriate to report an income around that range.
Please note that you can update your estimated income anytime throughout the year.