What is the ACA subsidy cliff in 2026?

The ACA subsidy cliff is the income line where help paying for a marketplace health plan stops completely: for 2026 coverage, the premium tax credit is generally only for households earning between 100% and 400% of the federal poverty line, so a single dollar over 400% can cost a whole year of help. The enhanced credits that removed that ceiling covered 2021 through 2025 and have lapsed, so the cliff is back.

For early retirees living on savings, that makes income something you plan, not something that just happens. Below we cover where the line sits, what counts as income, and how the order you draw from your accounts can keep you under it.

This is general education, not financial, tax or insurance advice. The law here has changed several times and Congress has debated changing it again, so check HealthCare.gov, your state marketplace or a tax professional before you rely on any figure.

Rules checked October 21, 2026 against the IRS premium tax credit Q&A (reviewed September 21, 2026) and HealthCare.gov's pages on the federal poverty level and what income to count. As of this check, a House-passed bill to extend the enhanced credits had not become law. If that changes, this guide will too.

Where the cliff sits

The line moves with the federal poverty guidelines and your household size. For 2026 marketplace coverage, in the 48 contiguous states:

Alaska and Hawaii have higher guidelines. When you shop for 2027 coverage this fall, the marketplace will use the 2026 guidelines instead: $15,960 for one person and $21,640 for two, which put 400% at about $63,840 and $86,560 (HealthCare.gov). Under current law, the 400% ceiling applies for 2027 as well.

Why it hits early retirees hardest

Marketplace premiums rise with age, so a 60-year-old's unsubsidized premium can be several times a 25-year-old's. Below the line, the credit caps what you pay as a share of income. Above it, you pay the full price. KFF has found that the loss of the enhanced credits lands hardest on older enrollees and people in high-premium areas (KFF).

Dana and Luis are made up. They're both 58, retired, and spend about $80,000 a year. If their 2026 income is $84,000, they're under the line for a couple and qualify for a credit. If a surprise capital gain pushes it to $85,000, they lose the credit for the whole year, and because there's no repayment cap, any advance credit they received has to be paid back at tax time. That one extra $1,000 of income could cost them many thousands of dollars.

What counts as income

The marketplace uses modified adjusted gross income (MAGI): your adjusted gross income plus any tax-exempt interest, non-taxable Social Security and certain foreign income. HealthCare.gov says to include most IRA and 401(k) withdrawals and capital gains, and not to include qualified distributions from a designated Roth account (HealthCare.gov).

In practice, for someone living on savings:

• Counts: traditional IRA and 401(k) withdrawals, Roth conversions, pension income, interest and dividends (taxable or not), capital gains, part-time pay, and all of your Social Security.
• Generally doesn't count: spending down cash you already had, the part of a sale from a taxable account that's your original cost (only the gain counts), and qualified Roth withdrawals. Roth IRA contributions can generally come back out without tax, but check the ordering rules before you rely on it.

How people plan around it

1. Pick your income first, then your accounts. Many early retirees decide on a target income for the year, safely under the line with a cushion, and then choose which accounts to draw from to land there. Which account do you spend first? walks through the usual orders.

2. Use taxable accounts for their cost basis. Selling $40,000 of a fund you paid $30,000 for adds only $10,000 of gain to your income. Picking the lots with the highest cost basis keeps it lower still.

3. Lean on Roth money and cash in the cliff years. Drawing from Roth contributions or a cash buffer covers spending without raising MAGI. The trade-off: that's money that would otherwise keep growing tax-free, so many people save it for exactly these years.

4. Watch the "good" tax moves. Tax-gain harvesting and Roth conversions both add to income. In a cliff year, a gain that's tax-free at the federal level can still cost you your whole premium tax credit. Many people run the numbers on both before doing either.

5. Mind the floor, too. Below 100% of the poverty line you generally don't get the credit, and in states that expanded Medicaid, very low income may move you to Medicaid instead. Aim for a range, not just "as low as possible."

6. Update your estimate during the year. If your income changes, update your marketplace application so your advance credit matches. That's the best protection against a big bill at tax time.

7. Compare job-based coverage. Some part-time jobs come with health insurance that can make the cliff matter far less. See Part-time jobs with health insurance, and Health care before Medicare for every option side by side.

Common questions

What is the ACA subsidy cliff?

It's the income level where the premium tax credit for a marketplace health plan ends entirely. For 2026 coverage, that's 400% of the federal poverty line. Just under it, you get help. Just over it, you pay the full premium, so a small rise in income can cost a lot.

What is 400% of the poverty level for 2026 coverage?

For 2026 marketplace coverage in the lower 48 states, it's about $62,600 for one person, $84,600 for two and $128,600 for a family of four, based on the 2025 poverty guidelines. Alaska and Hawaii are higher. For 2027 coverage, it's based on the 2026 guidelines: about $63,840 for one person and $86,560 for two.

Did the enhanced ACA subsidies get extended?

As of October 21, 2026, no. The enhanced credits that removed the 400% cap covered tax years 2021 through 2025. The House passed an extension, but it had not become law when we checked. Watch HealthCare.gov and the IRS for changes, because this could move.

What happens if my income goes over 400% by mistake?

You lose the premium tax credit for the year, and you reconcile on your tax return. For tax years after 2025, there's no cap on paying back excess advance credit, so you could owe all of it. Updating your marketplace estimate as soon as your income changes is the best protection.

Do Roth IRA withdrawals count as income for ACA subsidies?

Qualified Roth distributions aren't counted, and Roth IRA contributions can generally come out without tax. Roth conversions do count, because the converted amount is taxable income. That's why many early retirees plan conversions carefully in the years they rely on a marketplace plan.

Does selling stocks in a taxable account count as income?

Only the gain counts, not the whole sale. If you sell $20,000 of shares you bought for $15,000, $5,000 is added to your income. Choosing lots with a higher cost basis, or spending cash you already have, keeps your income lower.

Next step

Work out what your health insurance adds to your budget, and how much you'd need with it included.

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