ACA subsidy cliff calculator
The ACA subsidy cliff is the hardest edge in the US tax code: earn one dollar over 400% of the federal poverty level and your entire premium tax credit disappears — not tapered, gone. For an early retiree buying health insurance on the marketplace, that single dollar is the most expensive dollar they will ever earn. Coastline computes the cliff from the 2026 poverty guidelines and shows it inside a full retirement projection, so you can see which year of your plan crosses it.
The cliff by household size (2026)
The cliff moves with household size, because the poverty level does. Below the cliff you owe a capped percentage of income (9.96% at the top of the range) and the credit pays the rest; above it you owe the whole premium:
| Household | 100% FPL | Cliff (400% FPL) | Benchmark premium | Your share at the cliff | Credit lost |
|---|---|---|---|---|---|
| 1 | $15,650 | $62,600 | $11,000 | $6,235 | $4,765 |
| 2 | $21,150 | $84,600 | $24,000 | $8,426 | $15,574 |
| 3 | $26,650 | $106,600 | $27,000 | $10,617 | $16,383 |
| 4 | $32,150 | $128,600 | $30,000 | $12,809 | $17,191 |
| 5 | $37,650 | $150,600 | $33,000 | $15,000 | $18,000 |
Benchmark premiums above are illustrative for older enrollees (they rise steeply with age, so a 60-year-old's credit — and the cliff's cost — is far larger than a 30-year-old's). The credit lost is always the benchmark premium minus your capped share, so a higher premium means a bigger cliff.
The slope, then the drop
Below 400% FPL the subsidy tapers smoothly — which is why the cliff surprises people. Nothing in the shape of the curve warns you it ends. For the 2-person household above, with a $24,000 benchmark plan:
| % of FPL | MAGI | Capped share of income | Premium credit | You pay |
|---|---|---|---|---|
| 150% | $31,725 | 4.19% | $22,671 | $1,329 |
| 200% | $42,300 | 6.60% | $21,208 | $2,792 |
| 250% | $52,875 | 8.44% | $19,537 | $4,463 |
| 300% | $63,450 | 9.96% | $17,680 | $6,320 |
| 350% | $74,025 | 9.96% | $16,627 | $7,373 |
| 400% | $84,600 | 9.96% | $15,574 | $8,426 |
| 400% + $1 | $84,601 | — | $0 | $24,000 |
Run through a real projection, the same jump shows up as a spending shock rather than a tax line. A 60-year-old couple whose plan puts them exactly at the cliff pays $8,426 for health coverage; the version of that plan with one more dollar of income pays $24,000 — the projection's healthcare cost rises by $15,574 in a single step.
Why early retirees hit this and workers don't
Someone with a salary has little control over their MAGI. An early retiree has almost total control — and that is exactly what makes the cliff manageable, and dangerous:
- Which account you spend from sets your MAGI. Roth withdrawals and the return of your own basis in a taxable account are not income; a traditional 401(k) withdrawal is income, dollar for dollar. Two retirees spending the same amount can sit on opposite sides of the cliff.
- Roth conversions are the classic trap. A conversion is fully taxable ordinary income and counts in ACA MAGI, so the "fill the low brackets" advice that works beautifully at 63 can cost you $15,574 of premium credit at 60. Coastline folds conversions into the MAGI it tests against the cliff for exactly this reason.
- Capital gains count too. Harvesting gains, selling a rental, or a big mutual-fund distribution all push MAGI up. A single unplanned realization can cross the cliff retroactively — you find out at tax time.
- There is a floor as well as a ceiling. Below 100% FPL ($21,150 for a couple) the credit is also $0, on the assumption Medicaid takes over — which in non-expansion states can leave a gap. Deliberately showing too little income is its own mistake.
How to manage it
- Know your number before December. The cliff is a MAGI test for the calendar year. Once the year closes, nothing can be undone — the credit is reconciled on your return and you repay it.
- Spend basis in the cliff years. Taxable-account basis, cash savings, and Roth contributions fund spending without adding MAGI.
- Do conversions after 65. Once Medicare starts, the ACA cliff stops applying — though IRMAA takes over as the next income threshold, on a two-year lookback.
- If you must cross, cross big. The cliff is a step, not a slope: the marginal cost of the first dollar over is $15,574, and of the next $50,000 is nothing. A part-time job worth $5,000 can be a losing trade where one worth $60,000 is clearly worth it.
Why Coastline's version is different
Most free calculators hand you a single headline number with the assumptions hidden. Coastline is built the opposite way:
- Real tax math, not a flat rate. It applies federal and state income tax, long-term capital-gains rules, and account-by-account treatment (taxable, traditional, Roth) — in both your working years and retirement.
- The whole journey. It models accumulation (saving and investing) and drawdown (spending it down), so you see how the plan connects end to end, not just one half.
- The math is shown. Every figure has a click-through breakdown of how it was computed — a level of transparency even paid tools rarely expose.
- US and Canada. It natively handles Canadian plans (RRSP, TFSA, CPP, OAS) alongside US accounts, which most calculators ignore.
- Free, no signup. No account, no email, no account-linking. Your inputs run the projection and are then discarded.
Educational, not tax advice — and one honest modelling limitation. For a retiree, the projection estimates ACA MAGI from the household's spending need (living costs plus the premium) and then adds Roth conversions, Social Security, pension, and taxable rental income. Real MAGI is realized taxable income, which for someone spending down a taxable account is only the gain portion of each sale — often much less than the amount withdrawn. So the model is deliberately conservative and will generally place you HIGHER on the FPL scale than your tax return will. Use it to see how close your plan runs to the cliff and how conversions move you, not as a filing figure. Premiums, poverty guidelines, and the cliff itself are set annually and the enhanced subsidies that suspended the cliff expired at the end of 2025 — verify current rules before acting.
Common questions
What is the ACA subsidy cliff?
It is the income limit — 400% of the federal poverty level — above which the ACA premium tax credit drops to zero all at once instead of phasing out. For 2026 a household of 2 hits it at $84,600 of MAGI ($21,150 poverty level × 4). One dollar of income above that line forfeits the entire credit for the year.
How much does going over the ACA cliff cost?
Exactly the credit you were receiving, which is the benchmark premium minus your capped share of income. In this page's example a couple at the cliff pays $8,426 toward a $24,000 benchmark plan and the credit covers $15,574; one dollar over, they pay the full $24,000. That makes the marginal tax rate on that single dollar effectively $15,574 — the steepest in the code.
How do early retirees stay under the cliff?
By controlling which accounts fund their spending. Withdrawing your own basis from a taxable account, spending cash savings, and taking Roth withdrawals add little or no MAGI, while traditional 401(k)/IRA withdrawals and Roth conversions add it dollar for dollar. Capital-gain realizations count too. The practical method is to plan the calendar year deliberately and check your MAGI before December, because the credit is reconciled on your tax return.
Does a Roth conversion affect ACA subsidies?
Yes, and this is the central tension of early retirement. A conversion is fully taxable ordinary income and counts in ACA MAGI, so converting during your pre-65 marketplace years can cost you the credit — up to $15,574 a year in this example — while converting after 65 avoids the cliff entirely but runs into Medicare's IRMAA surcharges instead. Coastline models both so you can see which years are actually cheap to convert in.