The enhanced premium tax credits that lowered ACA Marketplace premiums for four years expired on December 31, 2025. As of mid-2026, Congress has not restored them, and the "subsidy cliff" at 400% of the federal poverty level is back in force. For plan year 2027, that means anyone earning even one dollar over the 400% line gets zero premium assistance, and the Congressional Budget Office projects benchmark premiums will rise another 7.7% on top of the increases already hitting enrollees in 2026. This guide explains exactly what the cliff is, where the 2027 income limits are likely to fall, and what you can do to keep coverage affordable.
What the "Subsidy Cliff" Actually Is
Before 2021, the ACA capped premium tax credit eligibility at 400% of the federal poverty level (FPL). Households earning below that line got help paying premiums. Households earning above it, even by a small amount, got nothing. Because a single extra dollar of income could erase thousands of dollars in subsidies, people called it a "cliff" rather than a gradual phase-out.
The American Rescue Plan Act (ARPA) temporarily removed that cliff in 2021. The Inflation Reduction Act (IRA) extended the fix through the end of 2025. During those years, two things were true:
- No income cap. People earning above 400% FPL could still qualify for a credit if the benchmark plan cost more than 8.5% of their income.
- Lower percentages across the board. The share of income enrollees were expected to pay toward the benchmark plan was reduced at every income level, dropping to 0% at the lowest incomes.
Both of those enhancements are now gone. Starting with plan year 2026, the ACA reverted to the pre-2021 rules, and unless Congress passes an extension, those pre-2021 rules also govern plan year 2027.
The 400% FPL Cliff Is Back for 2027
The hard income cutoff is the single biggest change. For 2026 coverage, the 400% FPL thresholds (based on the 2025 federal poverty guidelines) are:
| Household size | 400% FPL (2026 coverage) |
|---|
| 1 person | $62,600 |
| 2 people | $84,600 |
| 3 people | $106,600 |
| 4 people | $128,600 |
For 2027 coverage, Marketplaces will use the 2026 federal poverty guidelines, which are typically 3% to 5% higher than the prior year. The exact 2027 thresholds are not final until the numbers flow through, but they are expected to land approximately in this range:
| Household size | Projected 400% FPL (2027 coverage) |
|---|
| 1 person | approximately $64,000 to $65,000 |
| 2 people | approximately $86,000 to $88,000 |
| 3 people | approximately $109,000 to $111,000 |
| 4 people | approximately $131,000 to $133,000 |
Treat those 2027 figures as estimates until the Department of Health and Human Services publishes the final poverty guidelines. The key point does not change: earn a dollar over the line and your premium tax credit drops to zero.
What Happens to Your Premium in 2027
Two forces stack on top of each other in 2027. First, the enhanced credits are gone, so the percentage of income you are expected to contribute goes up. Second, CBO projects benchmark premiums themselves will rise roughly 7.7% in 2027, driven partly by healthier people dropping coverage after subsidies shrank.
Here is what the return of the cliff looks like in practice. Under the enhanced rules, no one paid more than 8.5% of income for the benchmark plan. Under the restored pre-2021 rules, a household right at 400% FPL can be expected to pay around 9.5% or more of income, and a household just over the line pays the full unsubsidized premium.
A widely cited example from 2026 shows the math clearly. A 60-year-old earning $62,000 (just under the cliff) might pay around $515 a month. The same 60-year-old earning $64,000 (just over the cliff) could pay around $1,244 a month, roughly 23% of their income, because they lose the credit entirely. For a family of four around $130,000, monthly premiums in one KFF example jumped from about $921 to about $1,998, an increase near $12,900 a year.
The people hit hardest by the cliff share three traits: older (premiums rise with age), living in a high-premium area, and income just above 400% FPL. A younger person in a low-cost market may still find an unsubsidized plan manageable. A couple in their early 60s in a rural high-premium region can face premiums that consume a quarter of their gross income.
Who Is Affected in 2027
The expiration touches different groups differently:
- Above 400% FPL: Full exposure. You lose all premium assistance and pay the unsubsidized rate.
- Between 150% and 400% FPL: You keep a credit, but it is smaller than it was through 2025. Your monthly share of the premium goes up even though you still qualify.
- Below 150% FPL: You keep a credit and remain the most protected group, though your contribution is no longer reduced to zero the way it was under the enhanced rules.
- Self-employed, early retirees, and gig workers: Overrepresented among the hardest hit, because their income often sits just above the cliff and they lack employer coverage.
Nationally, CBO projects the number of uninsured people will rise by about 3.7 million in 2027 as a direct and indirect result of the expiration, on top of the increase already occurring in 2026.
Will Congress Restore the Enhanced Credits?
This is the open question. As of mid-2026, no bill restoring the enhanced credits has passed. Several proposals are circulating. One bipartisan measure, the Bipartisan Health Coverage Affordability Act, would extend the enhanced credits for two years while adding new income caps and fraud protections. Democrats have generally pushed to extend or make the enhancements permanent, most Republicans have opposed a straight extension, and a smaller group of Republicans has entered bipartisan talks that could still produce a deal.
Any of these outcomes is possible for 2027:
- No action. The pre-2021 rules stay in place. The 400% cliff and higher percentages govern all of 2027.
- Full or partial extension. Congress restores the enhancements, possibly with new income caps, which would soften or remove the cliff again.
- A compromise. A capped or time-limited version passes, protecting some enrollees but not those at the highest incomes.
Because open enrollment for 2027 coverage runs in late 2026, the practical deadline for any change to affect your 2027 plan is tight. Watch for news through the fall of 2026, but plan your budget assuming the cliff stays unless a law actually passes.
What You Can Do Now
You are not powerless if you sit near or above the cliff. A few strategies can keep coverage affordable:
- Manage your Modified Adjusted Gross Income (MAGI). Because the cliff is a hard line, keeping income just under 400% FPL can preserve thousands in credits. Pre-tax contributions to a traditional IRA, HSA, or a self-employed retirement plan lower your MAGI. For someone hovering at 401% FPL, a modest deductible contribution can pull you back under the line.
- Compare all metal tiers. If you lose the credit, the benchmark Silver plan is no longer your reference point. A high-deductible Bronze plan paired with an HSA may cost far less per month when you are paying full freight.
- Check Medicaid first. If your income drops, you may qualify for Medicaid instead. In expansion states the cutoff is 138% FPL. This matters most for people whose income is variable year to year.
- Look at an ICHRA if you have an employer. Some employers are moving to Individual Coverage Health Reimbursement Arrangements, which reimburse individual-market premiums with tax-advantaged dollars.
- Estimate your income carefully. Overstating income at enrollment means smaller advance credits; understating it can trigger repayment at tax time. With the cliff back, an income surprise that pushes you over 400% FPL can mean repaying the entire advance credit.
The single most important move for anyone near the line is to run your actual numbers for 2027 before open enrollment, because the difference between 399% and 401% of FPL can be several thousand dollars.
How the Cliff Interacts With Your Tax Return
Premium tax credits are reconciled on your federal tax return using Form 8962. During the year you receive an advance credit based on your estimated income. At tax time, the IRS compares your estimate to your actual income.
Under the enhanced rules, repayment was capped for people who ended up over 400% FPL in some cases. With the cliff restored, if your actual income lands above 400% FPL, you generally must repay the full amount of advance credits you received, with no cap. This is the "astronomical tax bill" risk that financial planners have been warning about. If your income is unpredictable, it is safer to take a smaller advance credit during the year and claim the rest at filing than to owe a large repayment.
Frequently Asked Questions
Did the enhanced ACA credits already expire?
Yes. The enhanced premium tax credits created by the American Rescue Plan and extended by the Inflation Reduction Act expired on December 31, 2025. Coverage starting January 1, 2026, and continuing into 2027 uses the pre-2021 rules unless Congress passes new legislation.
What is the income limit for ACA subsidies in 2027?
The hard cutoff returns at 400% of the federal poverty level. Final 2027 figures depend on the 2026 poverty guidelines, but the limit is projected to be roughly $64,000 to $65,000 for a single person and approximately $131,000 to $133,000 for a family of four. Earn above that and you get no premium tax credit.
How much will my premium go up in 2027?
It depends on your age, location, and income. Enrollees who keep a credit will pay a higher share of income than they did through 2025. Enrollees who cross the 400% cliff lose all assistance and pay the full unsubsidized premium, which for older enrollees in high-cost areas can exceed 20% of income. CBO also projects benchmark premiums will rise about 7.7% in 2027.
Can I still get a subsidy if I earn just over 400% FPL?
No, not under the current rules. Unlike the enhanced version, the restored pre-2021 rules provide zero credit above 400% FPL. This is why managing your MAGI to stay under the line is worth serious attention if you are close.
Will Congress bring back the enhanced credits for 2027?
It is possible but not decided. Several proposals exist, including a bipartisan two-year extension with income caps, but as of mid-2026 nothing has passed. Because 2027 open enrollment happens in late 2026, any change would need to move quickly to affect your 2027 plan. Budget as though the cliff stays until a law is actually signed.
What can I do to lower my income below the cliff?
Contributing to a traditional IRA, an HSA, or a self-employed retirement plan reduces your Modified Adjusted Gross Income. Because the cliff is a hard line, even a small deductible contribution can move you from just over 400% FPL to just under it and restore your eligibility for the credit.
Sources: KFF, Congress.gov CRS, Bipartisan Policy Center, CNBC, healthinsurance.org
