What is the ACA subsidy cliff at 400% of the poverty line?
Under current law, a single dollar of income above the line can wipe out your entire marketplace tax credit.
How the subsidy works
The premium tax credit pays the difference between a benchmark plan's price and what the law expects you to contribute, a percentage of your income that rises as income rises. For 2027 that percentage goes from 2.15% at the lowest incomes up to 10.22% at 300% to 400% of the federal poverty line.
The cliff
Above 400% of the poverty line, the credit is zero. For plan year 2027 that line is $63,840 for one person and $86,560 for two. Earning one dollar more can cost thousands in lost credits.
What counts as income
The test uses modified adjusted gross income: wages, interest, dividends, capital gains, IRA withdrawals, Roth conversions, and the taxable part of Social Security. Qualified Roth withdrawals do not count.
Ways people stay under the line
- Contribute to a traditional IRA or an HSA, if eligible, to lower income.
- Fund spending from cash or Roth money in years you want low income.
- Spread capital gains and Roth conversions across years.
Rules can change; confirm current law at HealthCare.gov when you enroll.
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Sources: IRS Rev. Proc. 2026-26; HHS poverty guidelines.