The ACA subsidy cliff is back in 2026

If you plan to leave work before 65 and buy health coverage on the ACA marketplace to bridge the gap to Medicare, a rule that mattered to that plan changed at the start of this year — and it changed quietly enough that a lot of people who are already covered do not know about it yet.

From 2021 through 2025, enhanced premium tax credits did two things: they made existing subsidies larger, and they extended subsidies for the first time to people earning above 400% of the federal poverty level, capping what anyone paid for a benchmark plan at 8.5% of income regardless of how high that income was. That second part is what eliminated the old "subsidy cliff," where crossing 400% of poverty meant losing help entirely, all at once.

Those enhanced credits expired on schedule at the end of 2025. Congress did not extend them — competing proposals stalled in the Senate in December — and as of this writing several bills remain under discussion with nothing enacted. The cliff is back.

Why this lands on this site's readers specifically

Marketplace coverage is disproportionately used by people who have left a job before 65 and are not yet eligible for Medicare — retired early, laid off, self-employed, or covering the gap after a spouse's employer coverage ends. That is a specific, common situation in the years right before Medicare, and it is exactly the population this change affects.

It also interacts with a decision a lot of people make deliberately: keeping reported income low in the years before Medicare, often by living off savings rather than taxable withdrawals, partly because it used to maximize ACA subsidies. That strategy still works below 400% of poverty — it is worth more now, not less, since the credit at that income level still exists and unsubsidized premiums have risen too. It is the plan to hold income just over the line, or to not think about the line at all, that got considerably more expensive this year.

Also on The Second Half Guide 55, 60, 62, 65: when does “senior” actually start? There is no senior birthday. About a dozen unrelated clocks — 50, 55, 59½, 62, 65, 67 — set by different institutions, and only some of them matter. Read it →

What to actually check

• Find your household size and estimated 2026 income in dollars, then compare it to 400% of the federal poverty line for that household size — not last year’s income, this year’s estimate.
• If your household income for the year comes in above the applicable 400% threshold, the premium tax credit is not available for that year — it is a cliff, not a slope, the same shape as the Medicare IRMAA surcharge described elsewhere on this site.
• Income from IRA withdrawals, Roth conversions and realized capital gains all count toward the household income used to determine eligibility. Anyone considering one of these transactions specifically because of its effect on marketplace eligibility should check the full tax consequences with a qualified tax professional first — this page reports the rule, not the strategy.
• Because the repayment cap is gone for 2026, an income estimate that turns out too low is a bigger risk than in past years — there is no longer a ceiling on what you would owe back. If your income might come in higher than what you told the marketplace, update your application during the year rather than waiting for tax time.
• Re-check your plan during open enrollment even if nothing else about your life changed — the subsidy math changed under you, and the plan that made sense in 2025 may not be the best value in 2026.
• Watch for legislation. Proposals to restore some version of the enhanced credits have been introduced; none had passed as of this writing. If that changes, it changes the numbers on this page, and we will update it.

None of this is a reason to avoid marketplace coverage, and it is not advice about what your household should do — your income, your state, and your health all change the answer. It is a reason to run the actual numbers for your own household before you assume the plan you had last year still costs what it used to.