One Dollar Over $86,560 Costs a 62-Year-Old Couple $24,874: The 2027 ACA Cliff for Early Retirees
The enhanced premium tax credits that capped benchmark premiums at 8.5% of income expired on December 31, 2025. The House passed a three-year extension in January 2026; the Senate hasn’t. So when open enrollment for 2027 opens on November 1, the original rule is back: above 400% of the federal poverty level, no credit at all.
For early retirees this is the most expensive dollar in the tax code. We checked Rev. Proc. 2026-26 for the 2027 percentages and the January 2026 HHS poverty guidelines for the thresholds, then ran a 62-year-old couple through the ACA Subsidy Cliff calculator at KFF’s 2026 average benchmark premium ($625 a month for a 40-year-old, scaled to age 62 on the CMS default curve: $2,810 a month for the two of them).
At $86,560 of MAGI, exactly 400% of poverty for two, they pay 10.22% of income ($8,846) and the credit covers the other $24,874. At $86,561 they pay the full $33,721.
Where the cliff is
The cliff moves with household size and, in Alaska and Hawaii, with the higher poverty guidelines. These apply to 2027 coverage:
| Household | 48 states + DC | Alaska | Hawaii |
|---|---|---|---|
| 1 | $63,840 | $79,800 | $73,440 |
| 2 | $86,560 | $108,200 | $99,560 |
| 3 | $109,280 | $136,600 | $125,680 |
| 4 | $132,000 | $165,000 | $151,800 |
| 5 | $154,720 | $193,400 | $177,920 |
| 6 | $177,440 | $221,800 | $204,040 |
Household size is everyone on your tax return, including dependents who don’t need Marketplace coverage.
Below the cliff, income still costs you
The cliff gets the headlines, but the slope below it matters more for planning Roth conversions. Your required contribution is a percentage of income, and between 133% and 300% of poverty that percentage itself rises with income. So each extra dollar raises your premium by more than the percentage alone:
| Income (% of poverty) | Single MAGI | Required contribution | Extra premium per $1 of MAGI |
|---|---|---|---|
| 140% | $22,344 | 3.67% | 12.5¢ |
| 175% | $27,930 | 5.54% | 14.2¢ |
| 225% | $35,910 | 7.72% | 16.2¢ |
| 275% | $43,890 | 9.44% | 18.0¢ |
| 300–400% | $47,880–$63,840 | 10.22% | 10.2¢ |
That works like a second income tax while you’re on Marketplace coverage, as long as the credit hasn’t run out. For a single person at 275% of poverty, $1,000 more of Roth conversion costs about $182 in premium on top of the federal tax on it. Oddly, the 300–400% band is cheaper per dollar than the band below it, because the percentage stops rising at 10.22%.
Take the 62-year-old couple with $50,000 of MAGI from dividends and IRA withdrawals. Their credit is $29,747. Converting $36,560 to Roth brings them exactly to the cliff and the credit falls to $24,874: $4,873 of extra premium, 13.3% of the conversion. Converting one dollar more loses the remaining $24,874. If you’re weighing a Roth conversion ladder in the gap years, this is the number to put next to the 12% bracket.
What counts toward MAGI
Early retirees have unusual control over their income because the money they spend and the income the IRS sees aren’t the same thing:
- Counts in full: traditional IRA and 401(k) withdrawals, Roth conversions, wages and self-employment profit, interest, dividends (including the capital gain distributions mutual funds pay in December)
- Counts partly: a sale from a taxable account (only the gain), Social Security (the untaxed part is added back for this credit)
- Doesn’t count: spending cash savings, withdrawing your own Roth IRA contributions, the basis of anything you sell
A couple spending $90,000 a year can show $40,000 of MAGI if half their spending comes from cash and Roth contributions. The same couple can also cross the cliff by accident with a December fund distribution they didn’t plan for.
The repayment trap
The advance credit is paid to your insurer each month based on the income you put on your application. At tax time, Form 8962 compares it with the credit your actual MAGI earns. Until 2025 the repayment was capped for incomes under 400% of poverty. The One Big Beautiful Bill Act removed the caps from tax year 2026 on, so the whole difference comes due.
The same 62-year-old couple, having estimated $80,000 and received $25,545 in advance credits:
| Actual 2027 MAGI | Credit earned | Repay with the 2027 return |
|---|---|---|
| $80,000 | $25,545 | $0 |
| $86,560 | $24,874 | $670 |
| $86,561 | $0 | $25,545 |
| $90,000 | $0 | $25,545 |
A $6,560 overshoot costs $670. A $6,561 overshoot costs $25,545. If you’re close, update the application during the year, and keep the levers (a traditional IRA contribution can be made until the April filing deadline) in reserve.
Where this doesn’t apply
- Under 65 only. At 65 Medicare takes over, with its own income cliffs based on your income from two years earlier: see what a Roth conversion does to IRMAA.
- Young, single and in a cheap area. A 30-year-old at the cliff gets only $136 of credit, so crossing it barely matters. The cliff is a problem of age and high local premiums.
- Employer coverage. If anyone has an affordable employer offer, that person can’t get the credit at any income.
- State subsidies and state age curves. Several states add their own subsidies, and some rate by age differently (New York and Vermont don’t rate by age at all), so your exchange quote will differ.
- Congress. If an extension passes, the cliff and the higher percentages go away. Everything here is current law as of October 2026.
What to actually do
- Look up your 2027 benchmark premium when open enrollment opens on November 1 and enter it in the calculator with your household’s ages.
- Project MAGI for the whole year, including December fund distributions and the untaxed part of any Social Security.
- If you’re over the cliff by less than the credit at stake, close the gap: pre-tax 401(k) or traditional IRA contributions, an HSA with an HSA-eligible plan, or moving a conversion or sale to next year.
- If you’re well under it, use the room deliberately: convert to Roth up to the cliff, knowing each dollar costs 10 to 18 cents of premium on top of income tax.
- Report income changes to the Marketplace during the year. With no repayment cap, an outdated estimate is the most expensive mistake on this list. Retiring at 40 in the U.S.? Check how health costs change the FIRE math too.
Quick answers
What is the ACA subsidy cliff for 2027?
For 2027 coverage, the premium tax credit stops at 400% of the 2026 federal poverty guideline: $63,840 of MAGI for one person, $86,560 for two, $132,000 for four in the 48 states and DC. Alaska and Hawaii are higher ($79,800 and $73,440 for one person). One dollar over and the credit is zero.
How much does crossing the cliff cost?
It depends on age. At KFF's 2026 average benchmark premium, a single 30-year-old at the cliff gets only $136 of credit, so crossing costs little. A single 60-year-old loses $9,403, and a couple aged 62 loses $24,874, which is 29% of their $86,560 income.
If my income ends up over 400% FPL, do I have to repay the subsidy?
Yes, all of it. Starting with tax year 2026 the One Big Beautiful Bill Act removed the repayment caps, so the full advance credit is repaid on Form 8962. A 62-year-old couple who estimated $80,000 and received $25,545 in advance credits would repay all $25,545 if their MAGI came in at $86,561.
Does a Roth conversion count toward ACA income?
Yes. A Roth conversion is taxable income and raises MAGI dollar for dollar. Withdrawals of Roth contributions, spending from cash savings, and the basis portion of a taxable brokerage sale do not.
What does each extra dollar of income cost below the cliff?
Between 300% and 400% of poverty, 10.22 cents in higher premium for every dollar of MAGI. Between 133% and 300%, where the percentage climbs, it is 12 to 18 cents. That is on top of federal and state income tax.