Guide · ACA subsidy
Will a Roth conversion cost you your ACA subsidy?
For early retirees on marketplace health coverage, the ACA subsidy cliff is often the single biggest constraint on a conversion — bigger than the tax bracket itself. Here's how the 400% FPL cliff works in 2026 and how to convert around it.
The subsidy and the cliff
Households under 65 who buy coverage on the ACA marketplace can receive a premium tax credit that caps the cost of a benchmark plan at a share of income. From 2021 through 2025, temporary enhanced subsidies removed the upper income limit entirely — but those enhancements expired at the end of 2025. For 2026, the pre-enhancement rule is back: eligibility for any premium tax credit ends above 400% of the Federal Poverty Level. Cross that line by one dollar and you don't lose part of the subsidy — you lose all of it, for the whole year.
Why early retirees hit it hardest
The years just after leaving work and before turning 65 are usually a household's lowest-income years — which is exactly why they look like ideal conversion windows. But they're also the years marketplace coverage and the FPL cliff apply. A conversion sized purely to fill a tax bracket can blow straight through the ACA ceiling without the bracket ever showing it, because the FPL cliff and the ordinary bracket are two completely different thresholds.
Which MAGI counts
The relevant measure is the ACA MAGI — AGI plus tax-exempt interest plus the non-taxable portion of Social Security — judged against the prior year's FPL guidelines, not the current year's. That's a different number from the MAGI IRMAA uses, and the two can disagree by a meaningful amount for a household drawing Social Security.
A worked example
A pre-65 couple on marketplace coverage has an ACA MAGI of $78,000 against a 400% FPL line of roughly $84,600 (2026, household of two). They have about $6,600 of room. A $10,000 conversion pushes them $3,400 over the line — and because it's a cliff, that doesn't cost them $3,400 worth of subsidy, it costs the entire year's premium tax credit, which for a couple in their early 60s can run well into five figures. A $6,000 conversion instead stays under the cliff and keeps the subsidy intact.
How Harbor handles it
Harbor models the premium tax credit as a net federal item — the advance credit received minus any repayment owed — and folds it directly into the tax figure used everywhere else: the screening comparison, the marginal-rate curve, and the schedule optimizer all see the cliff. Because it's opt-in, a household without marketplace coverage sees no ACA effect at all, so the model never guesses at a subsidy that doesn't apply to you.
See your own ACA ceiling
Turn on marketplace coverage in your plan and Harbor shows the exact 400% FPL ceiling for every year.
Start planning — it's free →Common questions
Will a Roth conversion cost me my ACA health-insurance subsidy?
Conversion income can push you over 400% of the federal poverty line, where the premium tax credit can drop off entirely. Harbor flags the exact income ceiling before the cliff.
Is the ACA cliff bigger than my tax bracket?
For many early retirees, yes. Losing an entire year's premium tax credit can cost more than the tax savings from filling out the rest of a bracket — which is why Harbor treats the ACA cliff as its own wall rather than folding it into the bracket calculation.