A Higher Income Could Put Health Subsidies at Risk Next Year, New Data Shows

Earning more money in 2027 could come with an unexpected cost for some Americans buying health insurance through the Affordable Care Act Marketplace.

The income ceiling for the premium tax credit is again set at 400% of the federal poverty level after a temporary expansion allowed some higher-income households to receive subsidies from 2021 through 2025.

For 2027 Marketplace coverage, that means a single person living in the 48 contiguous states or Washington, D.C., generally cannot qualify for the premium tax credit if household income exceeds $63,840. For a family of four, the corresponding threshold is $132,000.

The figures are based on the 2026 federal poverty guidelines published by HHS, which set the poverty level at $15,960 for one person and $33,000 for a family of four.

The IRS says households with income above 400% of the applicable federal poverty level are not eligible for the premium tax credit. That creates a sharp cutoff for households whose income lands near the threshold.

It can be particularly difficult for freelancers, independent contractors and small business owners, whose earnings may change substantially during the year.

Why Income Estimates Matter

Marketplace subsidies are based on the income a household expects to earn during the coverage year.

When self-employed workers apply for coverage, HealthCare.gov asks them to estimate their net self-employment income for the year they are seeking coverage rather than simply using the previous year's earnings.

HealthCare.gov says people with unpredictable income should base their estimate on past experience, realistic expectations, industry standards and other available information.

If income changes during the year, Marketplace customers are encouraged to update their application so their subsidy can be recalculated.

That matters because the amount paid during the year is only an advance estimate of the premium tax credit a household ultimately qualifies for.

The Marketplace calculates an estimated credit based on factors including household income and family size, according to the IRS.

Consumers can choose to have some or all of that amount paid directly to their insurer each month, reducing the premium they pay out of pocket. The final amount is determined when the household files its federal tax return.

Going Over The Line Can Get Expensive

If actual income ends up higher than estimated, the premium tax credit allowed on the tax return may be smaller than the amount already paid to the insurer. The difference must then be reconciled at tax time. The repayment rules have also become stricter.

The IRS says repayment limits that previously protected some lower- and middle-income households from having to return the full amount of excess advance premium tax credits no longer apply for tax years after 2025.

Beginning in 2026, taxpayers generally must repay the full amount by which advance payments exceed the credit they ultimately qualify for.

The financial effect can be larger if final household income ends up above 400% of the federal poverty level.

At that point, the household generally becomes ineligible for the premium tax credit and may have to repay advance credit payments made on its behalf, according to the IRS.

For someone close to the threshold, an unexpected bonus, additional contract work, stronger business income or another increase in household earnings could therefore change the final subsidy calculation. Marketplace eligibility is based on modified adjusted gross income, or MAGI.

For self-employed workers, HealthCare.gov generally uses net self-employment income, business income after allowable business expenses, rather than gross revenue.

The Cutoff Is Different In Alaska And Hawaii

The $63,840 individual threshold and $132,000 family-of-four threshold apply to the 48 contiguous states and Washington, D.C.

Alaska and Hawaii use higher federal poverty guidelines. For 2026, HHS set the poverty guideline for one person at $19,950 in Alaska and $18,360 in Hawaii, putting their 400% thresholds above those used in the rest of the country.

Income is also not the only factor affecting eligibility. People generally cannot receive the premium tax credit if they have access to certain affordable employer-sponsored insurance or qualifying government coverage such as Medicare or Medicaid.

For households that remain below 400% of the poverty level, the size of the credit depends on income and the cost of qualifying Marketplace coverage.

The IRS has set the applicable percentage for households earning between 300% and 400% of the poverty level at 10.22% for 2027. That percentage is used as part of the calculation determining how much an eligible household is expected to contribute toward benchmark coverage.

Marketplace customers can update their income before tax season if their circumstances change.

HealthCare.gov tells enrollees to report income changes as soon as possible so their savings can be adjusted during the year.

For self-employed workers, the site specifically warns that earning more than originally reported could mean having to pay back some or all of the premium tax credits received.