ACA premium subsidies and repayment limit cliffs based on FPL

[NeilDH]

Happy New Year's Eve! It could be that time where we must finalize our income level and make sure we're not going over any cliffs. For me, it's the ACA premium tax credit repayment limit cliffs. (We have repayment limits one final year, as I highly doubt they'll return in whatever Congress decides with ACA premium help in 2026 and beyond.)

The repayment limit cliffs are dictated by the Federal Poverty Limit, as outlined here: I had Marketplace coverage in 2025 and have to reconcile my taxes for this year. What’s the most I would have to repay the IRS for tax credits paid on my behalf? | KFF

One key note about this, though, is that the cliffs are based on the FPL of the previous year, right? So for 2025, I gotta get my income under the certain percentage of the FPL of 2024, yes? (And another key note, which this little article neglects, is "income" means MAGI.)

It's shocking that articles or advice, or even formal instructions, don't clarify this. I can see people blowing the cliff because they looked at the current year's FPL when they needed to look at last year's (I almost did). But the federal Form 8962 does work that way (looks at previous year's FPL), and I find instructions that say your premium tax subsidy for the coming year is based on the previous year's FPL. Yet a lot of advice for year-end monitoring most often says only "FPL" without specifying which year's.

 

[plsprius]

NOT TAX ADVICE, but the instructions for form 8962 (2024) say, for example, "For 2024, the 2023 federal poverty lines are used for this purpose and are shown below." Looks to me like the FPL (for the purposes of the ACA PTC) is based on the prior year's levels.

 

[surprising]

https://www.healthreformbeyondthebasics.org/wp-content/uploads/2024/08/REFERENCE_YearlyGuidelines_CY2026-rev.pdf

This link seems pretty clear - 2025 Federal Poverty Guidelines (Coverage Year 2026)

I'll be going on ACA for first time in 2026 and I'm taking a cautious approach. I sold a bunch of stock under 0% LTCG and sitting on that cash. I think I'm going to target 200% FPL and monitor my income throughout the year, and when I hit that level, use cash for all expenses for the remainder of the year.

 

[NeilDH]

Ha! That Beyond the Basics PDF is exactly what tipped me off to the previous-year rule. I found it for the 2025 coverage year, too.

 

[jim584672]

Yes, previous year. The ACA FPL is from the FPL that updated in January of the previous year. Medicaid updates right away with no delay.

 

[SecondCor521]

The law uses the previous year FPL levels because people enroll in the fall for the next year. Enrollees receiving subsidies reasonably want to know those amounts so they can budget for their subsidized premiums. But the FPL for the next year is still in the future and unknown.

Websites are mixed in how they explain or don't explain this off-by-one situation. The clearest way is "2025 FPL levels for 2026 coverage" or similar, but many sites just say the first half or last half.

The Form 8962 instructions are the authoritative place to look.

 

[jim584672]

The 2026 FPL was just published. This will set the 2027 ACA numbers.

Federal Register :: Request Access

 

[GenXguy]

The 2026 FPL was just published. This will set the 2027 ACA numbers.

Federal Register :: Request Access

OK, so I need to stay under 200% of that in 2027. Let's hope the PTC's and CSR at the current levels (or higher) are still in place in 2027. The latest news is talking about the removal of all subsidies to insurance companies to keep the premiums affordable.

 

[Aerides]

So for two, it's 86,560 for next year. Barely an inflation bump I guess.

 

[FLSUnFIRE]

Ready to file my taxes and because my income was higher but under 400%, I have a limitation on my PTC repayment worth about $600 to me. I know it's the law and shouldn't cause me any problem but it feels like cheating the system (I didn't, decided late in the year to eat some taxes now and do a Roth Conversion that boosted my income). I should probably just relax and enjoy the accidental loophole. Tell me it will be ok.

 

[RunningBum]

Ready to file my taxes and because my income was higher but under 400%, I have a limitation on my PTC repayment worth about $600 to me. I know it's the law and shouldn't cause me any problem but it feels like cheating the system (I didn't, decided late in the year to eat some taxes now and do a Roth Conversion that boosted my income). I should probably just relax and enjoy the accidental loophole. Tell me it will be ok.

If it were me I could live with it if it was an accidental under estimating. I just estimate to the edge of 400% (or top of free QDivs if no ACA cliff) and I do a Roth conversion to that point anyway, so I wouldn't hit this. I can see how someone else could. I don't know if I'd be limited on my repayment if I went over the cliff in 2026 but I'm going to try very hard not to so hopefully that won't happen.

Others will do what they will do but if someone bragged about gaming the system that way I would probably think less of them. FLS, this is not you. I know there are those who think someone like me shouldn't get ACA subsidies in the first place but I am comfortable doing it. The quick rationale is that I had a lot of income taxed at 39.6% for a few years and now my taxable income pretty naturally stays low except for Roth conversions, so I don't see that as "gaming" the system. I probably wouldn't even mention my getting a subsidy here but I like to participate in the threads about it so I can learn from them and also share my experiences to perhaps help others.

 

[FLSUnFIRE]

I'll live just fine, the tax code has "screwed" me a few times over the years so I'll take the bank error in my favor. This was not on my radar -software calculated it and I was surprised. I'll take it.

There is something for everyone to hate about the tax code... I'll gladly give up my PTC if everyone regardless of marital status/procreation has to file single with no dependents and tax brackets are adjusted to be revenue neutral. lol

 

[NeilDH]

We all and any tax preparer and accountant are gaming the system, you could say, under the guise of tax strategy. But nothing is illegal here! In fact, the laws were written to benefit particular people; if it’s not you, it’ll be somebody else.

Meanwhile, about this PTC repayment loophole, I was stunned by this, too. My ACA broker didn’t even fully grasp it. I wrote about it a while back.

 

[jim584672]

The OBBB got rid of the repayment limits for 2026 and going forward.

 

[GenXguy]

I hit the payback limit for 2024 and still had to pay $950. I don't think it saved me all that much. My estimate was much closer for 2025, so I'm nowhere near that limit. So, I'm still paying the same amount in the long run.

 

[FLSUnFIRE]

We all and any tax preparer and accountant are gaming the system, you could say, under the guise of tax strategy. But nothing is illegal here! In fact, the laws were written to benefit particular people; if it’s not you, it’ll be somebody else.

Meanwhile, about this PTC repayment loophole, I was stunned by this, too. My ACA broker didn’t even fully grasp it. I wrote about it a while back.

Certainly there is a strategy there but when you declare your income for the PTC, you are affirming that it is what you believe to be your income so I for this case, intentionally lying could be considered fraudulent. -If I was on a jury I'd consider intent. If I was going to try this as a strategy, I wouldn't post that I was doing it! I was surprised and researched it before filing. I had already bumped up my estimated income for 2026 (I'm paying 3x OOP for my policy this year) and even over paid my estimated taxes in December before finding this as I was reviewing the tax forms prior to filing.

I can see why and it's nice that the law was benevolent to not cause hardship to those lower income households that the repayment could cause hardship to. I am surprised they don't have a lifetime limit for each payer so there is less incentive for "abuse" though.

 

[FLSUnFIRE]

I hit the payback limit for 2024 and still had to pay $950. I don't think it saved me all that much. My estimate was much closer for 2025, so I'm nowhere near that limit. So, I'm still paying the same amount in the long run.

I received excess APTC of $2,200 but repayment was capped at $1,625 so about $600 remained in my pocket.... that's not nothing!

 

[jim584672]

Tax year 2025 will be the last year for repayments are capped.

Changes for 2026...

No Repayment Caps: The protective caps ($750–$3,150 range for 2025) that limited the repayment of subsidies for those under 400% of the federal poverty level (FPL) no longer apply.

 

[GenXguy]

I received excess APTC of $2,200 but repayment was capped at $1,625 so about $600 remained in my pocket.... that's not nothing!

I looked it up. It saved me $61 net due to the cap. However, I did benefit further from the silver plan I was on in 2024 because I hit the out of pocket max due to CSR.