400% of the federal poverty level (FPL) is the income line that decides whether a pre-65 early retiree keeps an ACA premium tax credit in 2026, because the enhanced subsidies from the American Rescue Plan and Inflation Reduction Act expired after 2025 and the hard subsidy cliff returned. A household one dollar over 400% of FPL now receives zero premium tax credit (Source: 26 U.S.C. 36B(c)(1)(E); CRS Report R48290, Dec. 10, 2025).
For 2026 coverage, 400% of FPL is roughly $62,600 for a single filer and $84,600 for a couple, because the marketplace uses the 2025 HHS poverty guidelines ($15,650 for one person plus $5,500 per additional member). MAGI at or below that line can qualify a household for a premium tax credit; one dollar above it drops the credit to $0 (Source: 26 U.S.C. 36B(c)(1); 2025 HHS Poverty Guidelines).
What is 400% of the federal poverty level for 2026?
400% of the federal poverty level for 2026 coverage is about $62,600 for one person, $84,600 for two, $106,600 for three, and $128,600 for four in the 48 contiguous states and DC. These figures come from the 2025 HHS poverty guidelines, which govern coverage year 2026 (Source: 26 U.S.C. 36B(c)(1)(A); 2025 HHS Poverty Guidelines).
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The date detail trips up many calculators. The marketplace applies the poverty guidelines published in the calendar year before the coverage year, so coverage year 2026 uses the 2025 guidelines ($15,650 single, $62,600 at 400%), not the 2026 guidelines ($15,960 single, $63,840 at 400%) that some tools quote. Using the 2026 numbers overstates the single-filer ceiling by about $1,240 (Source: 2025 and 2026 HHS Poverty Guidelines). Eligibility is measured by MAGI, not assets, so a retiree with a large portfolio can still qualify in a low-income year, up until Medicare begins around age 65 (Source: 26 U.S.C. 36B(d)(2)).
What is 400% of the federal poverty level by household size?
By household size, 400% of FPL for 2026 coverage runs from about $62,600 for one person to $128,600 for a household of four, adding roughly $22,000 of headroom per extra member. Alaska and Hawaii use higher guidelines. The table pairs the 100% FPL floor with the 400% ceiling on the 2025 guideline basis (Source: 2025 HHS Poverty Guidelines).
| Household size | 100% FPL (2025 guideline) | 400% FPL ceiling (2026 coverage) |
|---|---|---|
| 1 person | $15,650 | ~$62,600 |
| 2 people | $21,150 | ~$84,600 |
| 3 people | $26,650 | ~$106,600 |
| 4 people | $32,150 | ~$128,600 |
| Each additional person | add $5,500 | add ~$22,000 |
These amounts apply to the 48 contiguous states and DC; Alaska and Hawaii publish higher guidelines, so both the floor and the 400% ceiling are larger there. Confirm the exact HHS figure for your household and state before setting an income estimate (Source: 2025 HHS Poverty Guidelines).
Why did the ACA subsidy cliff come back for 2026?
The ACA subsidy cliff came back for 2026 because the law that removed the 400% FPL cap applied only to tax years beginning after Dec. 31, 2020, and before Jan. 1, 2026. That provision expired on schedule and Congress did not extend it, so benefit year 2026 reverts to the pre-2021 rules (Source: 26 U.S.C. 36B(c)(1)(E); CRS Report R48290, Dec. 10, 2025).
From 2021 through 2025 the American Rescue Plan and then the Inflation Reduction Act deleted the hard income ceiling and capped the required premium contribution at 8.5% of income for households above the old limit. With expiration, 2026 restores a firm 400% FPL ceiling and higher applicable percentages up to 9.96% at the top of the range. The Congressional Research Service confirms the FY2026 continuing-resolution law did not affect that expiration, though a future extension by Congress could change the rules for 2027 and later (Source: Rev. Proc. 2025-25; CRS Report R48290).
How much income can I have and still get ACA subsidies as an early retiree?
For 2026, an early retiree can have household MAGI between 100% and 400% of FPL and still qualify for a premium tax credit, roughly $15,650 to $62,600 for one person and $21,150 to $84,600 for a couple in the contiguous states. Within that band the credit caps your share of income for the benchmark silver plan (Source: 26 U.S.C. 36B(b); Rev. Proc. 2025-25).
That capped share, the applicable percentage, rises with income and reaches 9.96% at the top of the eligible range for 2026, per the indexed table in Rev. Proc. 2025-25.
| Household income (% of FPL) | 2026 initial % | 2026 final % |
|---|---|---|
| Less than 133% | 2.10% | 2.10% |
| 133% to under 150% | 3.14% | 4.19% |
| 150% to under 200% | 4.19% | 6.60% |
| 200% to under 250% | 6.60% | 8.44% |
| 250% to under 300% | 8.44% | 9.96% |
| 300% to 400% | 9.96% | 9.96% |
Because premiums for people in their late 50s and early 60s are among the highest in the individual market, an older household that crosses the cliff can lose all premium assistance for the year. The dollar amount varies by age, plan, and rating area, so check any figure against a current quote (Source: illustrative only; results vary by rating area).
What counts as income for ACA subsidies (MAGI)?
Income for ACA subsidies is measured as MAGI: adjusted gross income increased by three items, foreign earned income excluded under section 911, tax-exempt interest, and the portion of Social Security benefits not otherwise in gross income. Household income then adds the MAGI of anyone in your family size required to file (Source: 26 U.S.C. 36B(d)(2)). Because it starts from AGI, most retirement income raises MAGI.
| Raises MAGI | Does not raise MAGI / can reduce it |
|---|---|
| Traditional IRA and 401(k) withdrawals (Source: IRS Pub. 590-B, 2025) | Qualified Roth IRA withdrawals |
| Roth conversions (taxed as ordinary income) | Withdrawals of cash-savings principal |
| Realized capital gains | Deductible HSA contributions |
| Rental and taxable investment income | Deductible traditional IRA or 401(k) contributions |
| Taxable pensions and part of Social Security (Source: 26 U.S.C. 86) | Capital-loss harvesting, up to $3,000/yr against ordinary income (Source: 26 U.S.C. 1211(b)) |
Do 401(k) and IRA withdrawals count?
Yes. Withdrawals from traditional, pre-tax 401(k) and IRA accounts are taxed as ordinary income, so they raise AGI and the MAGI used for premium tax credits. Distributions before age 59½ may also carry a 10% additional tax. These withdrawals are usually the dollars that push an early retiree toward the 400% FPL cliff (Source: IRS Pub. 590-B, 2025; IRS Topic No. 558).
Do Roth withdrawals count?
Qualified Roth IRA withdrawals generally do not count toward ACA MAGI, because they are not included in adjusted gross income. That is why Roth balances and taxable-savings principal can fund early-retirement spending without pushing a household over 400% of FPL. A Roth conversion, by contrast, is taxable and does raise MAGI (Source: 26 U.S.C. 36B(d)(2)(B); IRS Pub. 590-B).
How do I reduce my MAGI to stay under the 400% FPL cliff?
Several tools can lower MAGI for a given year, which can keep a household under the 400% FPL ceiling or move it into a lower applicable percentage. Each has eligibility rules and tradeoffs, so these are options the rules allow, not recommendations, and are factors to weigh with a qualified professional.
- Deductible HSA contributions. For 2026, individual-market Bronze and catastrophic plans are treated as high-deductible health plans, making enrollees HSA-eligible; deductible contributions reduce AGI and MAGI (Source: IRS Notice 2026-5; P.L. 119-21).
- Deductible traditional IRA or workplace-plan contributions. For 2026 the IRA limit is $7,500 ($8,600 at 50-plus) and the 401(k) elective deferral limit is $24,500; deductibility phases out at higher incomes (Source: IRS Notice 2025-67).
- Splitting stock sales across two tax years. Spreading a large realization can keep a single year’s MAGI under the ceiling.
- Harvesting capital losses. Realized losses offset realized gains, and up to $3,000 of net loss can offset ordinary income per year, with the rest carried forward (Source: 26 U.S.C. 1211(b)).
- Spending from Roth and cash. Living on Roth accounts and taxable-savings principal funds the year without adding to MAGI.
Retirees age 70½ and older who give to charity sometimes use a qualified charitable distribution, which comes only from an IRA (not directly from a 401(k)) and is excluded from income up to $111,000 for 2026 (Source: IRS Notice 2025-67; 26 U.S.C. 408(d)(8)).
Can my income be too low for ACA subsidies?
Yes. The 400% FPL ceiling gets the attention, but there is also a floor. Premium tax credits generally require household income of at least 100% of FPL, and in Medicaid-expansion states adults under 65 below 138% of FPL are routed to Medicaid rather than subsidized marketplace coverage (Source: 26 U.S.C. 36B(c)(1)(A); 42 U.S.C. 1396a(a)(10)(A)(i)(VIII)).
For an early retiree, that means suppressing MAGI too aggressively can forfeit the marketplace subsidy entirely and shift you into Medicaid, which has different provider networks and, for some long-term-care services, estate-recovery rules. The planning target is a band, not simply as low as possible. In states that did not expand Medicaid the interaction differs and can leave a coverage gap below 100% FPL, so confirm your state’s expansion status for the benefit year (Source: 42 U.S.C. 1396a).
What happens if I underestimate my income?
If advance premium tax credits (APTC) are set from an estimate and your actual MAGI comes in higher, you reconcile the difference on IRS Form 8962. For 2026, section 71305 of the One Big Beautiful Bill Act (P.L. 119-21) removed the repayment cap for tax years beginning after Dec. 31, 2025, so a household that underestimates MAGI may have to repay the full excess advance credit with no dollar limit (Source: Rev. Proc. 2025-32; 26 U.S.C. 36B(f)).
That raises the stakes of a Roth conversion or large capital gain in a subsidy year, because a move that lifts MAGI above 400% of FPL can trigger full clawback of the year’s advance credit. Some retirees estimate conservatively, while others update their exchange estimate mid-year when a conversion or sale becomes likely (Source: IRS Form 8962; Rev. Proc. 2025-32).
The multi-year tradeoff: subsidies now vs. RMDs and IRMAA later
Suppressing income to capture ACA subsidies before 65 can raise taxable income later, because dollars left inside a traditional IRA or 401(k) keep growing and must eventually come out. Subsidies today can be offset by larger required minimum distributions and Medicare surcharges after 65. The figures below are hypothetical, for education only (Source: IRS Pub. 590-B, 2025).
| Strategy path | Ages 60-64 (pre-Medicare) | Age 73+ (RMD years) |
|---|---|---|
| Suppress MAGI, take no conversions | Keep MAGI under 400% FPL; may qualify for a premium tax credit that year | Larger pre-tax balance can mean larger RMDs, higher ordinary-income tax, and greater chance of Medicare IRMAA surcharges |
| Convert to Roth during 60-64 | Conversion is ordinary income; can push MAGI over 400% FPL and forfeit the credit that year | Smaller pre-tax balance can mean smaller RMDs and lower IRMAA exposure |
The crossover is the year where the subsidy given up by converting is smaller than the future tax and IRMAA cost of not converting. It depends on portfolio size, returns, tax brackets, and how many pre-Medicare years remain, which is why a worked Roth conversion break-even analysis tends to be more useful than a rule of thumb. RMDs begin at age 73, and at 75 for those born in 1960 or later (Source: IRS Pub. 590-B, 2025).
How this connects to Roth conversion timing
Because a Roth conversion adds ordinary income to AGI and therefore to 36B MAGI, one approach some early retirees consider is pausing conversions during the ACA-subsidy years and resuming after Medicare begins at 65, when the credit is no longer at stake. Deciding how much to convert, and by the RMD and NIIT thresholds it may cross, is a factor to weigh with a qualified professional (Source: IRS Pub. 590-B, 2025).
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Frequently asked questions
What is 400% of the federal poverty level for 2026?
Coverage year 2026 uses the 2025 poverty guidelines, based on $15,650 for one person plus $5,500 per additional member. So 400% of FPL is about $62,600 for one person, $84,600 for two, $106,600 for three, and $128,600 for four in the contiguous states. Confirm the exact HHS guideline for your household and state (Source: 2025 HHS Poverty Guidelines).
How much income can I have and still get ACA subsidies?
For 2026, household MAGI must be at least 100% of FPL and no more than 400% of FPL, roughly $15,650 to $62,600 for one person and $21,150 to $84,600 for a couple in the contiguous states. In Medicaid-expansion states, adults under 65 below 138% of FPL are generally eligible for Medicaid instead (Source: 26 U.S.C. 36B(c)(1)(A); 42 U.S.C. 1396a).
What is the ACA subsidy cliff?
The ACA subsidy cliff is the hard income ceiling at 400% of FPL above which premium tax credits fall to zero. A household one dollar over the ceiling receives no subsidy, unlike 2021 through 2025 when a temporary law removed the cap. The cliff returned for benefit year 2026 (Source: 26 U.S.C. 36B(c)(1); CRS Report R48290).
What counts as income for ACA subsidies (MAGI)?
MAGI is adjusted gross income plus foreign earned income excluded under section 911, tax-exempt interest, and the untaxed portion of Social Security benefits. Traditional retirement withdrawals, Roth conversions, capital gains, pensions, and rents raise it; qualified Roth withdrawals and cash-savings principal generally do not (Source: 26 U.S.C. 36B(d)(2)).
Do 401(k) and IRA withdrawals count as income for ACA subsidies?
Yes. Withdrawals from traditional, pre-tax 401(k) and IRA accounts are taxed as ordinary income, so they raise AGI and the MAGI used for premium tax credits. Distributions before age 59½ may also carry a 10% additional tax (Source: IRS Pub. 590-B, 2025; IRS Topic No. 558).
Why did the ACA subsidy cliff come back in 2026?
The cliff returned because the law removing the 400% FPL cap applied only to tax years beginning after Dec. 31, 2020, and before Jan. 1, 2026. It expired on schedule and the enhanced credits were not extended, so 2026 reverts to the pre-2021 rules with the hard ceiling restored (Source: 26 U.S.C. 36B(c)(1)(E); CRS Report R48290, Dec. 10, 2025).
Is 400% FPL based on gross or net income?
Neither exactly. The 400% FPL test uses MAGI, which starts from adjusted gross income (gross income minus above-the-line adjustments) and adds back tax-exempt interest, excluded foreign earned income, and the untaxed portion of Social Security. It is not gross income and not taxable income after the standard deduction (Source: 26 U.S.C. 36B(d)(2)).
Sources
26 U.S.C. 36B (premium tax credit, MAGI, 400% FPL cap): https://www.law.cornell.edu/uscode/text/26/36B
26 U.S.C. 1211 (capital-loss limitation; $3,000 offset): https://www.law.cornell.edu/uscode/text/26/1211
42 U.S.C. 1396a (Medicaid eligibility; 138% expansion group): https://www.law.cornell.edu/uscode/text/42/1396a
CRS Report R48290, “Enhanced Premium Tax Credit and 2026 Exchange Premiums: FAQ,” updated Dec. 10, 2025: https://www.congress.gov/crs-product/R48290
Rev. Proc. 2025-25 (2026 applicable percentages; 9.96% required contribution): https://www.irs.gov/pub/irs-drop/rp-25-25.pdf
Rev. Proc. 2025-32 (2026 adjustments; P.L. 119-21 sec. 71305 repayment-cap removal): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
IRS Notice 2025-67 (2026 retirement plan and IRA amounts; QCD limit): https://www.irs.gov/pub/irs-drop/n-25-67.pdf
IRS Notice 2026-5 (Bronze and catastrophic plans treated as HDHPs for 2026): https://www.irs.gov/pub/irs-drop/n-26-05.pdf
2025 HHS Poverty Guidelines (used for coverage year 2026): https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines
IRS Publication 590-B (IRA distributions; Roth conversions): https://www.irs.gov/publications/p590b
IRS Premium Tax Credit Q&A and Form 8962: https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit
About the author
Craig Wear, CFP®, is the founder of Q3 Advisors, a registered investment adviser focused on retirement tax planning for people approaching and entering retirement. His work centers on how Roth conversions, RMDs, Medicare IRMAA, and marketplace subsidies interact across the pre-Medicare and post-65 years.
