ACA Subsidy Cliff
A step-function threshold where premium tax credits vanish entirely the dollar your MAGI exceeds 400% of the Federal Poverty Level.
What it is
The Affordable Care Act provides premium tax credits (subsidies) to individuals who buy health insurance through the marketplace and earn between 100% and 400% of the Federal Poverty Level. In 2026, 400% FPL is $62,600 for a single filer and $84,600 for a couple.
Below 400% FPL, you receive a subsidy that caps your insurance premium at a percentage of your income. The moment your MAGI crosses 400% FPL by even $1, the entire subsidy disappears — you owe back any advance credits you received during the year.
This is a true step function — there is no phase-out. A $1 overage can cost $8,000–$12,000 in lost subsidies depending on your plan and household. Pre-65 retirees who rely on marketplace coverage face this cliff directly.
How it triggers
ACA MAGI is your AGI with certain add-backs: student loan interest, IRA deductions, and excluded foreign income. Social Security income is included at the full gross amount (not just the taxable portion). A Roth conversion is counted in ACA MAGI in the year it occurs — unlike IRMAA, there is no two-year lookback.
- ACA MAGI = AGI + student loan interest + IRA deduction + excluded foreign income
- Social Security counts at gross (not the 85% taxable portion)
- Roth conversions raise ACA MAGI dollar-for-dollar in the conversion year
- Advance premium tax credits (APTC) paid during the year are reconciled on Form 8962
- If annual MAGI exceeds 400% FPL, all APTC received must be repaid on your tax return
What it costs
The cost depends on your plan, age, and household size. Marketplace premiums before subsidies can reach $800–$2,000/month for a couple in their early 60s. A subsidy of $8,000–$12,000 per year is common. Losing it entirely for $1 of excess income is a pure step-function loss.
Even a modest Roth conversion can push a pre-65 retiree over the 400% FPL threshold. Planning requires knowing your MAGI with the conversion included — and that MAGI must match the ACA definition, not the IRMAA definition.
How to see your own ACA Subsidy Cliff headroom
CliffEdge computes your ACA MAGI using the correct IRC §36B definition, compares it to the 400% FPL for your household size, and shows your exact headroom before the cliff. The Roth conversion slider lets you see how each additional dollar of conversion moves you toward (or over) the threshold.
Enter your Social Security income, IRA withdrawals, and planned Roth conversion to see your ACA MAGI in real time.
Frequently asked questions
Does Social Security count toward the ACA MAGI cliff?+
Yes. Social Security income is included in ACA MAGI at the full gross amount — not just the taxable 85%. This is different from your regular tax return, where only up to 85% of SS may be taxable. For ACA purposes, every dollar of SS counts.
What happens if I go over the cliff mid-year?+
If you received Advance Premium Tax Credits (APTC) during the year, you must repay them on Form 8962 when you file your tax return. If your actual MAGI ends up above 400% FPL, you owe back all the credits you received.
Is the ACA cliff the same as the Medicaid cliff?+
No. The Medicaid eligibility threshold is 138% FPL (in expansion states). The ACA subsidy cliff is at 400% FPL. These are two separate thresholds. CliffEdge models the ACA cliff at 400% FPL, not the Medicaid threshold.
Sources & data currency
HHS — 2026 Federal Poverty Guidelines
https://www.federalregister.gov/documents/2025/01/17/2025-01377/annual-update-of-the-hhs-poverty-guidelinesVerified 2026-07-18
IRC §36B — Premium Tax Credit statutory authority
https://www.irs.gov/pub/irs-pdf/p974.pdfVerified 2026-06-17
All thresholds sourced from IRS, CMS, and HHS publications. Not financial advice — verify critical numbers before acting. See full methodology →