The ACA Subsidy Cliff in 2027: How Much Income Is Too Much?
If you retire before 65, the Affordable Care Act Marketplace is probably how you’ll get health insurance until Medicare starts.
And for 2027, one number matters more than any other: the income level where your tax credit disappears completely. It’s called the subsidy cliff, and it’s back.
The short answer
For 2027 coverage, you lose all help with your premiums if your income is above 400% of the federal poverty line. For most of the country, that means:
| Household size | Subsidy cliff for 2027 coverage |
|---|---|
| 1 person | $63,840 |
| 2 people | $86,560 |
| 3 people | $109,280 |
| 4 people | $132,000 |
These are based on the 2026 poverty guidelines ($15,960 for one person, plus $5,680 for each additional person), which is what the Marketplace uses for 2027 coverage. Alaska and Hawaii have higher limits.
Below the cliff, the tax credit shrinks gradually as income rises. Above it, the credit is zero. There is no phase-out. One dollar over can cost you the entire credit.
Why the cliff is back
From 2021 through 2025, temporary rules removed the cliff: no household paid more than 8.5% of its income for a benchmark plan, however much it earned.
Those rules expired on December 31, 2025. The House passed an extension in January 2026, but as of this writing the Senate has not voted on it, and nothing has become law.
So 2026 and 2027 coverage follow the original ACA rules, cliff included.
For 2027, the IRS has also raised the share of income people are expected to pay toward a benchmark plan: from 2.15% at the lowest incomes up to 10.22% (IRS Revenue Procedure 2026-26).
How big is the cliff, in dollars?
It depends on your age and where you live, because older people and some areas pay much more for the same plan.
That’s what makes the cliff so steep for early retirees: the rules let a 64-year-old be charged three times as much as a 21-year-old.
A real example, using 2026 Marketplace prices for a couple aged 62 and 60 in Houston (2027 prices come out in November):
- With income of $84,000, the benchmark silver plan costs them about $697 a month after the tax credit.
- With income of $84,601, just over that year’s cliff, the same plan costs $2,588 a month.
That’s roughly $22,700 a year for $601 of extra income.
“Income” isn’t what you think it is
The cliff is measured against a specific number: your household’s ACA modified adjusted gross income (MAGI).
For early retirees, that’s good news, because how you fund your spending matters as much as how much you spend.
- Counts: traditional IRA and 401(k) withdrawals, Roth conversions, pensions, all of your Social Security benefits (including the part that isn’t taxed), dividends and interest (including tax-exempt municipal bond interest), and the gain on investments you sell.
- Doesn’t count: spending from cash savings, qualified Roth IRA withdrawals, HSA money used for medical bills, and the original cost of investments you sell.
Two households can spend exactly the same amount and land on opposite sides of the cliff, depending only on which accounts they draw from.
Common ways people cross the cliff without noticing
- A Roth conversion that pushes income just over the line.
- Selling investments with large gains, or a fund paying out a big year-end capital gain distribution.
- Starting Social Security mid-year: all of it counts for the ACA, even the untaxed part.
- A required withdrawal from an inherited IRA.
What to do with this
The cliff is based on your income for the whole calendar year, and you estimate it when you enroll. If your income ends up over the cliff, you repay the advance credit when you file your taxes.
So the time to plan is before the year starts and before any large withdrawal, conversion or sale.
This free Bridge to 65 calculator does the math for your situation. Enter your ZIP code, ages and where your money will come from, and it shows:
- your real Marketplace prices and tax credit,
- exactly how far you are from the cliff, and what crossing it would cost,
- which of your income counts and which doesn’t,
- and what the next $1,000 of IRA withdrawals would cost you in federal tax and lost credit.
It’s free, there’s no signup, and nothing you enter is stored.
This article is general information, not tax or insurance advice. Figures reflect the rules for 2027 coverage as published by October 2026; Congress could still change them.