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A pay raise could leave some Americans paying substantially more for health insurance in 2026, following the expiration of enhanced Affordable Care Act (ACA) premium tax credits at the end of 2025.
Federal subsidies make ACA marketplace plans affordable for millions of Americans, but eligibility now ends when household income exceeds 400% of the federal poverty level. For married couples in most states, that threshold is $84,600 for 2026 coverage.
- Married couples earning more than $84,600 in 2026 generally lose eligibility for federal ACA premium subsidies in most states.
- Older adults who are not yet eligible for Medicare could face annual health insurance premiums exceeding $20,000.
- Eligible retirement and health savings account contributions may help reduce income below the subsidy threshold, while self-employed households may qualify for additional tax deductions.
Households earning even $1 above the limit can lose their entire federal premium subsidy. Those who received advance tax credits to reduce monthly insurance payments may also have to repay assistance when filing their tax returns.
The change could be particularly costly for older adults who have not reached Medicare eligibility, especially self-employed individuals and those without access to employer-sponsored coverage. Some could face annual health insurance premiums exceeding $20,000.
With interest rates and inflation already placing pressure on household finances, the loss of premium assistance could create a substantial additional expense.
How to avoid the ACA subsidy cliff in 2026
The expiration of enhanced premium tax credits has restored a strict income cutoff at 400% of the federal poverty level. Crossing that threshold eliminates eligibility for federal premium assistance rather than gradually reducing the subsidy.
When income exceeds the threshold by only a few thousand dollars, reducing modified adjusted gross income (MAGI) may help preserve eligibility.
For ACA purposes, MAGI generally includes adjusted gross income, which reflects wages and other taxable income after applicable adjustments, plus certain additional amounts such as nontaxable Social Security benefits and foreign income.
Eligible contributions to a health savings account (HSA) or qualified retirement plan can help reduce the income used to determine subsidy eligibility.
IRA and HSA contributions for the tax year can generally be made until the April 15 tax-filing deadline, while employee contributions to 401(k) plans generally must be completed by the end of the calendar year.
These strategies are not available to everyone. Some households may lack the cash needed to make additional retirement or health savings contributions.
What happens if household income exceeds the ACA subsidy limit?
For households unable to reduce their income below the cutoff, certain tax deductions may still help offset health insurance expenses.
Self-employed taxpayers above the subsidy threshold may qualify to deduct eligible family health insurance premiums and the deductible portion of their self-employment taxes.
Unlike contributions to retirement accounts or HSAs, these deductions do not necessarily require households to set aside additional money.
The calculation nevertheless requires care. Under IRS rules, taxpayers must account for the relationship between premium tax credits and deductible health insurance expenses. Subsidies reduce the premiums paid out of pocket, which can also reduce the amount eligible for deduction.
For self-employed households, accurately calculating income, available deductions and advance premium tax credits is particularly important when determining whether additional earnings could eliminate federal health insurance assistance.
