ACA Subsidies in 2027: Income Limits, the Subsidy Cliff & What You’ll Pay

Posted on by Neal Shanske | Category: ACA Marketplace

For several years, one of the harshest features of the Affordable Care Act disappeared.

Someone earning slightly more than 400% of the federal poverty level could still qualify for help paying Marketplace health-insurance premiums.

That protection is gone.

For 2027 coverage, the ACA subsidy cliff is back.

In the 48 contiguous states and Washington, D.C., the upper income limit for the premium tax credit is:

  • $63,840 for one person
  • $86,560 for a household of two
  • $109,280 for a household of three
  • $132,000 for a household of four

Those figures are 400% of the 2026 federal poverty guidelines, which are used for determining premium tax credit eligibility for 2027 Marketplace coverage.

And the cliff is a real cliff.

If your household income is at or below the applicable 400% threshold and you otherwise qualify, you can potentially receive a premium tax credit.

If your household income is above it, you cannot.

That means someone whose income lands just over the line can potentially lose thousands of dollars in subsidies.

There is another important 2027 change to understand: the old caps that sometimes limited how much excess advance premium tax credit had to be repaid are gone.

If the Marketplace subsidizes your premiums based on an income estimate that turns out to be too low, you can be required to repay the full excess subsidy when you file your tax return.

For anyone buying ACA Marketplace coverage in 2027, estimating income has become much more important.

Quick Answer: What Are the ACA Subsidy Income Limits for 2027?

For most households, eligibility for the ACA premium tax credit generally requires household income of at least 100% and no more than 400% of the federal poverty level, assuming you meet the other eligibility rules.

For 2027 coverage, the relevant federal poverty guidelines are the 2026 guidelines.

Household Size 100% FPL 400% FPL
1 $15,960 $63,840
2 $21,640 $86,560
3 $27,320 $109,280
4 $33,000 $132,000
5 $38,680 $154,720
6 $44,360 $177,440

These figures apply to the 48 contiguous states and Washington, D.C. Alaska and Hawaii have higher federal poverty guidelines.

You can see the current figures directly from the U.S. Department of Health and Human Services poverty guidelines.

The 400% ACA Subsidy Cliff Is Back

This is the biggest change for many Marketplace customers.

Before 2021, the premium tax credit generally disappeared once household income exceeded 400% of the federal poverty level.

The American Rescue Plan temporarily eliminated that upper-income limit, and later legislation extended the enhanced subsidies through 2025.

That temporary expansion ended.

The IRS now states that the premium tax credit generally requires household income to be no more than 400% of the federal poverty line.

For 2027, that means a one-person household at $63,840 may potentially qualify.

A one-person household above $63,840 does not qualify for the premium tax credit under the normal rules.

This creates the return of the situation people used to call the ACA subsidy cliff.

Why the Subsidy Cliff Can Cost Thousands of Dollars

Imagine a 60-year-old buying Marketplace coverage in an expensive insurance market.

Suppose the benchmark Silver plan costs $900 per month.

At exactly 400% of the federal poverty level for a one-person household—$63,840 in 2027—the maximum applicable contribution percentage is 10.22%.

That works out to roughly:

  • $6,524 per year
  • or about $544 per month

If the benchmark premium is $900 per month, the premium tax credit could potentially cover roughly the difference between the $900 benchmark premium and the approximately $544 expected contribution.

That would be about $356 per month, or more than $4,200 for the year.

Move above the 400% income limit, and that premium tax credit can disappear.

The exact subsidy depends on your age, location, household composition and the price of the benchmark plan in your area, so this example is only illustrative.

But it shows why the cliff can be financially significant.

What Percentage of Income Will You Be Expected to Pay in 2027?

The premium tax credit is designed around the cost of the second-lowest-cost Silver plan available to you, often called the benchmark plan.

The government calculates an expected household contribution based partly on your income as a percentage of the federal poverty level.

The IRS has already published the 2027 applicable percentage table:

Household Income 2027 Applicable Percentage
Below 133% FPL 2.15%
133% to under 150% FPL 3.23% to 4.30%
150% to under 200% FPL 4.30% to 6.78%
200% to under 250% FPL 6.78% to 8.66%
250% to under 300% FPL 8.66% to 10.22%
300% through 400% FPL 10.22%

You can see the official table in IRS Revenue Procedure 2026-26.

These percentages do not mean that every Marketplace plan costs exactly that share of your income.

They are used to calculate the premium tax credit relative to the benchmark Silver plan.

You can choose a cheaper plan and potentially pay less, or a more expensive plan and pay more.

What Does 400% of the Poverty Level Mean in 2027?

For Marketplace subsidy purposes, 2027 eligibility uses the poverty guidelines that are in effect when Open Enrollment begins.

Because enrollment for 2027 coverage begins in 2026, the 2026 federal poverty guidelines apply.

Here are several useful income points for the 48 states and Washington, D.C.:

Household Size 150% FPL 200% FPL 250% FPL 300% FPL 400% FPL
1 $23,940 $31,920 $39,900 $47,880 $63,840
2 $32,460 $43,280 $54,100 $64,920 $86,560
3 $40,980 $54,640 $68,300 $81,960 $109,280
4 $49,500 $66,000 $82,500 $99,000 $132,000

ACA Household Income Is Not Simply Your Salary

This is another place where people get into trouble.

The Marketplace does not simply look at the salary printed on your employment offer.

Premium tax credit eligibility uses household modified adjusted gross income, or MAGI.

For ACA purposes, that generally starts with adjusted gross income and then adds back certain amounts, including:

  • tax-exempt interest;
  • non-taxable Social Security benefits;
  • and certain excluded foreign income.

It can include income from more than just your paycheck.

Potential sources include:

  • wages;
  • self-employment income;
  • taxable interest;
  • dividends;
  • capital gains;
  • taxable retirement-account withdrawals;
  • pensions;
  • rental income;
  • unemployment compensation;
  • and other taxable income.

The IRS explains the ACA household-income calculation in its Premium Tax Credit questions and answers.

Capital Gains Can Push You Over the Subsidy Cliff

This is particularly important for households close to 400% of the poverty level.

Suppose a single Marketplace enrollee expects $60,000 of household income for 2027.

That person may appear safely below the $63,840 subsidy ceiling.

Then in December, they sell an investment and realize a $10,000 taxable capital gain.

Their household income could jump above the subsidy limit.

That can change the premium tax credit calculation dramatically.

The same issue can arise from:

  • selling stocks or mutual funds;
  • selling investment property;
  • large year-end bonuses;
  • unexpected self-employment income;
  • taxable IRA distributions;
  • Roth conversions;
  • or other one-time taxable income.

If you are close to the subsidy cliff, seemingly unrelated financial decisions can affect your health-insurance cost.

Retirement and HSA Contributions May Affect ACA Income

The reverse can also be true.

Certain legitimate deductions and pre-tax contributions may lower adjusted gross income and therefore Marketplace household income.

Depending on your circumstances, these can include:

  • pre-tax 401(k) or similar workplace retirement contributions;
  • deductible traditional IRA contributions;
  • eligible Health Savings Account contributions;
  • and certain deductions available to self-employed taxpayers.

That does not mean everyone near the subsidy cliff should rush to make a financial transaction solely to obtain a health-insurance subsidy.

Eligibility rules for IRA deductions, HSAs and retirement accounts can be complicated.

But if your projected income is close to 400% of the federal poverty level, it can be worth discussing the interaction with a tax professional before the end of the year.

The Repayment Rules Are Harsher Now

The subsidy cliff is not the only reason income estimates matter.

Marketplace subsidies are frequently paid to your insurance company in advance.

These are called advance payments of the premium tax credit, or APTC.

You estimate your income when you enroll.

The Marketplace uses that estimate to calculate a subsidy.

The subsidy is sent to your insurer each month, reducing the premium you pay.

Then, when you file your tax return, the IRS compares:

  • the subsidy you received in advance;
  • with the premium tax credit you were actually entitled to based on your final annual income.

This process is called reconciliation.

Before 2026, lower-income households could sometimes benefit from statutory caps limiting how much excess advance credit they had to repay.

Those repayment caps no longer apply for tax years after 2025.

If you receive more advance premium tax credit than you ultimately qualify for, you can be required to repay the full excess amount.

The IRS explicitly confirms this in its current Premium Tax Credit guidance.

What Happens If You Estimate $50,000 but Earn $65,000?

This can now be a very expensive mistake for a single person.

At enrollment, someone projecting $50,000 of income may qualify for meaningful advance subsidies.

If that person’s actual 2027 household income ends up above $63,840, the final tax calculation may show that they were not eligible for any premium tax credit.

The advance payments already sent to the insurance company do not simply disappear.

They are reconciled on the tax return.

If the household was not entitled to them, the excess can increase the amount of tax owed or reduce the taxpayer’s refund.

This is why people close to the 400% cutoff should be especially cautious about taking the maximum possible subsidy in advance.

You Do Not Have to Take the Entire Subsidy in Advance

When you qualify for a premium tax credit, you can generally choose how much of the estimated credit to have paid to the insurance company during the year.

You may use:

  • all of it;
  • some of it;
  • or none of it.

If your income is predictable, using the full subsidy can make sense.

If your income is highly variable—particularly if you are self-employed, receive commissions or bonuses, trade investments, or expect a potentially large capital gain—taking less of the credit in advance can reduce the risk of a painful reconciliation bill.

If you ultimately qualify for more credit than you used in advance, you can generally claim the remaining amount on your federal income tax return.

Update the Marketplace When Your Income Changes

Do not wait until tax season if your financial circumstances change materially during 2027.

Update your Marketplace application when there is a meaningful change in:

  • income;
  • family size;
  • marital status;
  • employment;
  • eligibility for employer insurance;
  • or other factors affecting subsidy eligibility.

If your income rises, the Marketplace can reduce the advance subsidy going forward.

That does not erase excess subsidies you already received, but it can prevent the problem from growing for the rest of the year.

What If Your Income Falls?

A falling income may increase the premium tax credit.

It may also make you eligible for Medicaid, depending on your state and household circumstances.

If your income decreases substantially, update the Marketplace rather than continuing to pay a premium based on the old estimate.

Cost-Sharing Reductions Are a Separate Subsidy

The premium tax credit lowers your monthly premium.

There is another ACA subsidy that can reduce what you pay when you actually use medical care.

It is called a cost-sharing reduction, or CSR.

CSR can lower:

  • deductibles;
  • copayments;
  • coinsurance;
  • and the out-of-pocket maximum.

Cost-sharing reductions are generally available to eligible Marketplace customers with household income up to 250% of the federal poverty level.

There is an important catch:

You must choose a Silver Marketplace plan to receive the cost-sharing reduction.

That can make a Silver plan much more valuable than a cheaper-looking Bronze plan for someone who qualifies.

Who Does Not Qualify for an ACA Premium Tax Credit?

Income is only one eligibility test.

You generally cannot receive the premium tax credit for a month if you are eligible for certain other qualifying coverage.

That can include:

  • affordable employer-sponsored coverage that provides minimum value;
  • Medicare;
  • Medicaid;
  • CHIP;
  • TRICARE;
  • or certain other government health coverage.

You also generally must purchase coverage through the Health Insurance Marketplace or an applicable state Marketplace.

Buying an ACA-compliant plan directly from an insurance company outside the Marketplace does not normally qualify you for the premium tax credit.

Employer Coverage Can Block Marketplace Subsidies

For 2027, the IRS affordability percentage for employer-sponsored coverage is 10.22% of household income.

If qualifying employer coverage is considered affordable under ACA rules and provides minimum value, you may not qualify for a premium tax credit even if buying your own Marketplace policy would otherwise be expensive.

The calculation is different for employees and family members, so households offered employer insurance should check the specific rules rather than assuming that everyone in the family is automatically disqualified from Marketplace assistance.

2027 ACA Subsidy Checklist

Before enrolling for 2027, I would do the following:

  1. Estimate your total 2027 household MAGI, not just salary.
  2. Check your household’s 400% poverty-level limit.
  3. Include likely investment gains, bonuses and retirement distributions.
  4. Check whether anyone has access to employer coverage.
  5. Compare the benchmark Silver premium with your expected contribution.
  6. Determine whether you qualify for cost-sharing reductions.
  7. Be cautious about taking the full advance subsidy if your income is unpredictable.
  8. Update the Marketplace during the year when income changes.
  9. Keep your Form 1095-A.
  10. File Form 8962 to reconcile the premium tax credit.

Frequently Asked Questions About ACA Subsidies in 2027

What is the maximum income for ACA subsidies in 2027?

For the 48 contiguous states and Washington, D.C., 400% of the 2026 federal poverty level is $63,840 for one person, $86,560 for two, $109,280 for three and $132,000 for four. Household income above the applicable 400% threshold generally makes you ineligible for the premium tax credit.

Is there an ACA subsidy cliff in 2027?

Yes. The temporary rule allowing premium tax credits above 400% of the federal poverty level expired. For 2027, households above 400% FPL generally cannot receive the premium tax credit.

What happens if I go slightly over the ACA subsidy income limit?

You can lose eligibility for the entire premium tax credit. If advance subsidies were already paid on your behalf during the year, you may have to repay excess credits when you file your federal tax return.

Are ACA subsidies based on gross income or taxable income?

Neither description is quite correct. Marketplace subsidy eligibility uses household modified adjusted gross income, which starts with federal adjusted gross income and makes certain additions.

Do capital gains count toward ACA subsidy income?

Taxable capital gains generally affect adjusted gross income and therefore can affect Marketplace subsidy eligibility.

Do Social Security benefits count as ACA income?

ACA household MAGI includes both taxable Social Security income and certain non-taxable Social Security benefits. Supplemental Security Income, or SSI, is treated differently.

Can I reduce my income to qualify for an ACA subsidy?

Certain legitimate pre-tax contributions and deductions can reduce adjusted gross income, depending on your circumstances. These may include workplace retirement contributions, deductible IRA contributions and eligible HSA contributions. Tax rules and eligibility requirements apply, so households close to the subsidy cutoff may want professional tax advice.

Do I have to repay ACA subsidies if my income is higher than expected?

You may. Beginning with tax years after 2025, the previous statutory repayment caps no longer apply. If your advance premium tax credit exceeds the amount you ultimately qualify for, the full excess may have to be repaid.

Can I choose not to take the ACA subsidy in advance?

Yes. Eligible taxpayers can generally choose to use all, some or none of the estimated premium tax credit in advance and reconcile the final amount on their tax return.

The Income Estimate Is No Longer a Throwaway Question

Marketplace applications have always asked people to estimate next year’s income.

For 2027, that number deserves considerably more attention.

The 400% subsidy cliff is back.

The old repayment caps are gone.

And the difference between a reasonably accurate estimate and a badly wrong one can be thousands of dollars.

If your income is comfortably below the subsidy cutoff and predictable, the process may be straightforward.

If you are near 400% of the federal poverty level, self-employed, expecting investment gains, considering a retirement-account withdrawal or otherwise have variable income, keep an eye on the number throughout the year.

Your health insurance subsidy is ultimately based on what you actually earn—not what you hoped you would earn when you filled out the Marketplace application.

And in 2027, crossing the wrong line can be expensive.

For enrollment dates and the shortened federal Marketplace deadline, see our guide to Health Insurance Open Enrollment 2027.