Understanding the Impact of Enhanced Premium Tax Credit Expiration
by HealthyFP
The 2026 Cliff Crisis
Critical Change: Beginning in 2026, enhanced premium tax credits expire, and the subsidy "cliff" returns. Anyone earning at or above 400% of the Federal Poverty Level gets ZERO subsidy and must pay 100% of their health insurance premium.
Important: For 2026 marketplace coverage, eligibility is based on the 2025 Federal Poverty Guidelines (published January 2025). You estimate your 2026 income when applying, receive advance premium tax credits monthly to reduce your premiums, then reconcile based on actual income when filing your 2026 tax return (in 2027).
If you underestimate income and earn too much, you may owe money back. If you overestimate, you get a refund.
Your Information
Total people in your tax household
Total monthly second-lowest cost silver plan premium for everyone enrolling.
How do I find this?
2025 FPL (for 2026 coverage)
$21,150
400% of 2025 FPL (THE CLIFF)
$84,600
Your % of FPL
236%
Distance from Cliff
$34,600
Your Benchmark Premium
$1,250/mo
Your Estimated Monthly Premium
2025 (Enhanced Credits)
$158
3.8% of income
2026 (Cliff Returns)
$331
7.9% of income
Your Increase
+$173
$2,076/year
Marginal Health Insurance Tax Cost
--
The percentage of each additional dollar of income that goes toward higher health insurance costs due to reduced subsidies.
Chart 1: Your Expected Premium Contribution (% of Income)
This is the % of your income you're expected to contribute toward the benchmark premium. Higher income = higher %.
Chart 2: What YOU Pay Monthly (After Tax Credit)
Your actual monthly out-of-pocket cost. Goes UP as income rises. Jumps at 400% FPL when subsidy ends.
Scenario Analysis
% of FPL
Annual Income
2025 Monthly
2026 Monthly
Increase
Status
How to Find Your Benchmark Premium (SLCSP)
The benchmark premium is the second-lowest cost silver plan (SLCSP) available in your area. It varies by zip code, ages of enrollees, and tobacco use. If multiple people are enrolling, add the SLCSP premium for each person together. Three ways to find it:
HealthCare.gov Plan Browser: Go to healthcare.gov/see-plans, enter your zip code and ages, and browse silver plans. The second-lowest silver plan premium is your benchmark. If enrolling multiple people, add each person's SLCSP premium together for your total.
KFF Subsidy Calculator: The KFF Health Insurance Marketplace Calculator estimates your SLCSP based on zip code, ages, and household size. Look for the "Second Lowest Cost Silver Plan" line in the results.
Form 1095-A (Prior Enrollees): If you were enrolled in a marketplace plan last year, your Form 1095-A (Column B) shows your SLCSP premium. This is last year's amount — it may change for 2026, but it's a reasonable starting point.
Not sure? A national average benchmark for a 40-year-old individual is roughly $625/month. For two 40-year-old adults, roughly $1,250/month. These are estimates — your local SLCSP may be significantly higher or lower.
Understanding the 400% FPL Cliff
2025 (Enhanced Credits): Your premium is capped at 8.5% of income, even above 400% FPL. Everyone gets help based on a sliding scale.
2026 (Cliff Returns): At 400% FPL or above, you get ZERO subsidy and pay 100% of the benchmark premium.
The Cliff Effect: Earning $1 over the threshold can cost you over $1,000/month in lost subsidies.
FPL Timing: 2026 coverage uses 2025 Federal Poverty Guidelines (published January 2025).
MAGI Matters: Pre-tax contributions to 401(k), IRA, HSA reduce your MAGI and can help you stay below the cliff.
Important Disclaimers
Benchmark Premium: This calculator uses the monthly SLCSP premium you enter. Actual premiums vary significantly by zip code, rating area, age, and tobacco use. Use healthcare.gov/see-plans or the KFF calculator to find your actual SLCSP. Results are only as accurate as the benchmark you enter.
Estimated vs Actual Income: You estimate your 2026 income when enrolling. The IRS reconciles credits based on your actual income when you file your 2026 tax return in 2027. If you earn more than estimated, you may owe money back; if less, you get a refund.
MAGI Calculation: Modified Adjusted Gross Income (MAGI) differs from gross income. Pre-tax contributions to 401(k), traditional IRA, and HSA reduce your MAGI and can help you stay below the cliff.
2025 FPL for 2026 Coverage: For 2026 marketplace coverage, the IRS uses the 2025 Federal Poverty Guidelines (published January 2025), not 2026 guidelines.
Geographic Variation: SLCSP premiums vary widely by location — from roughly $430/month to over $930/month for a 40-year-old individual depending on the state and rating area. Always look up your actual local SLCSP.
Not Tax/Legal Advice: This is for planning purposes only. Consult a tax professional or financial advisor for your specific situation.