A raise is supposed to help your finances, but for some Americans with Affordable Care Act plans, it could backfire this year.
Subsidies are what make these plans affordable for millions of Americans — but there’s a catch. Once your earnings top 400 percent of the federal poverty level, or $84,600 for married couples for 2026 coverage, those federal assistance payments vanish. And if you’ve received advance payments throughout the year to cut your monthly bill, you may have to pay those back.
In most states, married couples earning more than $84,600 this year generally won’t receive any federal premium assistance. That could be a surprise for many people, since the enhanced premium tax credits for this coverage expired at the end of 2025.
Older adults not yet eligible for Medicare could be the most affected, particularly if they are self-employed or ineligible for workplace plans. Some in this group could face annual premiums of more than $20,000.
That puts a lot of taxpayers in a tight spot, particularly at a time of higher interest rates and high inflation.
How to avoid a financial cliff
The changes to the ACA law at the end of 2025 turn the income limit of 400 percent of the federal policy level into a cliff. Earn $1 over that amount and you lose all federal subsidies.
Carson Hornish, owner of Carson Health Advising, said the first thing he looks at is a household’s income relative to this threshold. If the gap is only a few thousand dollars, it’s worth the effort to find a way to reduce your modified adjusted gross income. This figure includes your wages after applying any tax deductions, plus nontaxable Social Security benefits and foreign income.
Some options include making eligible contributions to a health savings account or qualified retirement plan. IRA and HSA contributions can be made all the way up to the April 15 tax-filing date, as opposed to end of the year for 401(k) plans.
The catch is that not all households have available cash to fund these types of contributions. And as Hornish cautioned, “Lowballing projected income to collect on an advance credit” is a big mistake due to the subsidy cliff, which would then force you to repay those credits.
What if you can’t avoid the subsidy cutoff?
Hornish said that self-employed households above the limit may be able to deduct their family health insurance premiums and half of their self-employment taxes. “This is the piece most people in their spot miss, and it takes no extra cash.” However, IRS rules require you to account for the fact that receiving more subsidies also reduces the premiums you pay.
Married couples may also have options that aren’t immediately obvious. If one spouse has access to employer-sponsored insurance, for example, Hornish suggested comparing the cost of covering both spouses through that plan, as opposed to one spouse purchasing an individual policy on the marketplace.
Some states offer premium assistance. New Mexico is a standout example, providing subsidies even to those with incomes above 400 percent of the federal poverty level. But most states aren’t that generous, and New Mexico’s added subsidies are only currently funded through June 30, 2027, though they could be extended beyond that point.
Cheaper coverage isn’t always better
Bronze plans typically carry lower monthly premiums than silver and gold plans, and can be an option for those short on cash. But bronze plans typically carry higher deductibles and out-of-pocket costs, making them costly if you require significant treatment. What matters most is the total estimated cost of a plan when all of this is factored in, not just which one offers the lowest monthly premium.
Other cheap alternatives, such as health care sharing and fixed indemnity products, also carry risks. “The monthly price looks lower, but they are not ACA insurance, they can exclude preexisting conditions and cap what they pay,” Hornish warned. For many couples, that is the risk they can least afford.
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