The expanded premium tax credits that softened marketplace health insurance for four years expired on December 31, 2025, and Congress has not extended them. For 2026, the structure reverted to the original design: subsidies phase down as income rises, then stop cold at 400% of the federal poverty line. Not taper. Stop. For a two-person household in most states, that line sits at $84,600 of modified adjusted gross income for 2026 coverage (Rev. Proc. 2025-25; 2025 poverty guidelines).
One dollar over it and the credit is zero. For a couple in their early 60s buying their own coverage, the credit at stake can be well into five figures a year, because premiums at that age are the market’s highest.
There is a second change riding along that has gotten less attention. Through 2025, if you underestimated your income and received too much credit in advance, the amount you repaid at filing was capped. Beginning with tax year 2026, the caps are gone (Public Law 119-21). Guess low, and the full overpayment comes back on the return. The cliff got sharper on both faces.
Why This Is a Retirement Planning Article
Here is what makes this different from an insurance story. A 62-year-old with a paycheck cannot do much about MAGI. A 62-year-old retiree spending from savings chooses much of their MAGI, because the same $80,000 of spending can be assembled many ways. Withdrawals from a pre-tax IRA count in full. Selling from a taxable account counts only the gain. Spending cash, or drawing amounts you already paid tax on, can count near zero. The lifestyle is identical. The reported income is not, and for 2026 the difference decides whether the household keeps its subsidy.
I sat with a couple this spring, both 62, who wanted to retire at year-end. Their draft budget covered the bridge to Medicare from his IRA alone, which pushed reported income past the line and priced the credit at zero. We rebuilt the same spending from a mix of accounts and the picture changed by five figures a year. Nothing about their life moved. The sequence did.
The Honest Trade-off
Now the uncomfortable part, because these bridge years are asked to do two jobs at once.
The years between retirement and 65 are also the classic window for Roth conversions, the deliberate filling of low brackets before required distributions arrive. Conversions raise MAGI. Subsidies want MAGI low. For 2026, maxing both in the same year is off the table for most households, and anyone who says otherwise has not run the numbers.
Which job wins is a case-by-case answer. A large subsidy at age-62 premiums can outweigh a year of conversion at the margin, and the reverse is true for households with outsized pre-tax balances and cheap coverage alternatives. Sometimes the answer is to alternate years: convert hard in one, harvest the subsidy in the next. The point of this article is not to hand you the answer. It is to make sure both jobs appear on the same whiteboard, because I keep meeting plans where each was decided on its own, by different people, in different seasons.
And when Medicare arrives at 65, this problem does not end. It changes costume: the subsidy cliff hands off to the Medicare surcharge tiers, which read your income with a two-year delay. Same lever, new dial.
The takeaway: if you will be under 65 and on marketplace coverage in 2026, your income target for the year deserves to be a designed number, not a residual. The cliff for a two-person household is $84,600, the repayment caps are gone, and which account pays for the groceries is now a five-figure decision.
FAQ
What is the ACA subsidy cliff for 2026?
Above 400% of the federal poverty line, the premium tax credit is zero for 2026 coverage. For a single person in most states that is $62,600 of MAGI; for a two-person household, $84,600. Below the line, credits phase down in steps; crossing the line ends them outright.
Do Roth conversions affect ACA subsidies?
Yes. Conversion income raises MAGI dollar for dollar, and MAGI determines the credit. In 2026 a conversion that pushes you over 400% of the poverty line eliminates the subsidy for the year, so conversions and subsidies have to be planned together, in the same conversation.
What happens if I underestimate my income on a 2026 marketplace application?
Advance credits you were not entitled to are repaid in full with your tax return. The repayment caps that protected households through 2025 were eliminated starting with tax year 2026, which makes a realistic income estimate, updated mid-year if things change, worth real money.
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This article is education, not individual advice. What fits you depends on your full picture. California readers use Covered California; the mechanics are the same.