Please note, this summary below is based on the current rules, but as of 11/24/25 there is now speculation that the administration wants to expand subsidies in some way for 2026 and 2027 at least, by lifting the FPL income limit and or continuing some sort of phase in. Nothing has changed yet for 2026 but the likelihood of change to the current rules seems pretty high. The site will be updated for any changes.
The “subsidy cliff” refers to a sharp cutoff in eligibility for the Premium Tax Credit (PTC) for health insurance purchased through the Health Insurance Marketplace (such as HealthCare.gov), based on household income as a percentage of the federal poverty line (FPL). This cliff is set to return in 2026 due to the expiration of temporary provisions that expanded PTC eligibility.
Background: Temporary Expansion (2021–2025)
For tax years 2021 through 2025, Congress temporarily expanded PTC eligibility by removing the upper income limit. During these years, taxpayers with household income above 400% of the FPL could still qualify for a PTC if their insurance premiums exceeded a certain percentage of their income. This meant that the PTC phased out gradually as income increased, rather than ending abruptly at a specific threshold.
What Changes in 2026?
Starting in 2026, the law reverts to the original rules under Internal Revenue Code section 36B:
PTC eligibility will be limited to taxpayers with household income between 100% and 400% of the FPL for their family size.
If a taxpayer’s household income exceeds 400% of the FPL, they will not be eligible for any PTC, regardless of how much their insurance premiums cost.
This abrupt loss of eligibility at the 400% FPL threshold is known as the “subsidy cliff.” For example, a family with income just below 400% of the FPL could receive thousands of dollars in PTC, but if their income increases by even $1 above the threshold, they lose the entire credit .
For 2026 the subsidy cliff for each family size is as follows:
| Family Size | MAGI 400% of Federal Poverty Line (Subsidy Cliff) |
| 1 | $62,600 |
| 2 | $84,600 |
| 3 | $106,600 |
| 4 | $128,600 |
Practical Impact
Individuals with income at or just above 400% of the FPL will lose all PTC eligibility in 2026.
This can result in a significant increase in net premium costs for those affected, as they will be responsible for the full, unsubsidized cost of their Marketplace health insurance.
Everyone should be aware that even a small increase in income above the 400% FPL threshold can result in the loss of thousands of dollars in premium assistance.
Example
Suppose the 2026 FPL for a family of two is $84,600. If a family’s income is $84,599, they may qualify for a substantial PTC. If their income increases to $84,601, they lose the entire credit and must pay the full premium.
Planning Considerations
Individuals near the 400% FPL threshold should be especially careful with income planning for 2026.
Even small increases in income (such as from bonuses, capital gains, or retirement distributions) could push them over the cliff. There may be actions you can take before the end of 2025 to lower your income for 2026 to stay under the subsidy cliff.
If you will have insurance through healthcare.gov for 2026 and work with a financial advisor and or CPA make sure they are aware of your situation and the subsidy cliff. If you think your income may be close and would like to work on a specific plan or strategies to keep your income below the threshold please call or email me:
Phone: 913-325-2493
Email Address: taxdomainllc@gmail.com
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