Subsidy cliff
Updated for plan year 2026
In plain terms
The subsidy cliff is the income line above which marketplace premium tax credits stop entirely. For 2026, it sits at 400 percent of the federal poverty level: earn a dollar over, and the credit can drop from substantial to zero. The temporary pandemic-era rules that smoothed this edge from 2021 through 2025, capping premiums at a share of income with no hard cutoff, expired, so the cliff returns for 2026 coverage. Just under the line, your premium is capped; just over it, you pay full price.
A plain example
A 2026 household sits at 399 percent of the federal poverty level and gets a premium tax credit that caps its benchmark cost near 9.96 percent of income. Earn a few hundred dollars more, crossing 400 percent, and the credit vanishes. The same plan that cost a few hundred a month now costs its full premium, a swing that can top $1,000.
Why it matters
Near the cliff, a small raise or a missed income estimate can cost you your entire subsidy and trigger repayment at tax time. Knowing where the line is lets you plan around it, through retirement contributions or an HSA that lower MAGI, instead of being blindsided.
A common point of confusion
The cliff is about your final, actual income, not your estimate. Underestimating during the year and landing just over 400 percent at tax time can mean repaying the entire advance credit, since the cliff doesn't cap repayment above the line the way it's limited below it.